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UPDATE 2-Bellamy's Australia doubles revenue growth outlook, shares jump 8 pct
October 11, 2017 / 10:45 PM / 7 days ago

UPDATE 2-Bellamy's Australia doubles revenue growth outlook, shares jump 8 pct

* Bellamy’s expects FY18 revenue growth of 15-20 percent

* Still “challenges to navigate” as it implements turnaround plan

* Company shares jump more than 8 percent to 10-month high (Adds shares, broker quote)

By Tom Westbrook

SYDNEY, Oct 12 (Reuters) - Infant formula maker Bellamy’s Australia Ltd, under pressure after its China strategy came unstuck, increased its revenue forecast for the current financial year on indications its turnaround plan was bearing fruit.

This gave legs to a recovery in Bellamy’s shares, driving them up as much 8.4 percent to a 10-month high on Thursday. The stock had been battered over December and January, shedding two-thirds of its value, after new import rules in top market China threatened the company’s profits.

While there are still “challenges to navigate” as Bellamy’s implements its turnaround plan, it now expects its core business to post a revenue growth of about 15 percent to 20 percent in the year to June 2018, versus a prior view for a 5-10 percent rise, the company said in a statement.

“Early results in FY18 have been positive and consequently Bellamy’s is upgrading its FY18 guidance,” Bellamy’s said.

Last year, Bellamy’s swung to a loss after China imposed rules requiring foreign vendors to register by 2018. Some skipped registering and dumped their product, triggering a price drop and a profit warning from the Australian firm.

It has since announced a plan to help its business turn a corner based on renegotiating its supply deals and buying a China-registered formula cannery in Melbourne.

After initial hiccups, with China suspending the Melbourne cannery’s import licence in July, the outlook brightened for Bellamy’s with the licence reinstated in August. Its shares have rallied almost 200 percent since January’s low.

The company, however, said it needs a further registration from the China Food and Drug Administration, which it does not expect to get before Dec. 31, before the cannery can export.

“It’s going through a phase where it has to rebuild trust within the market,” said Mathan Somasundaram, a market strategist at stockbroker Blue Ocean Equities.

Describing as positive the latest revenue forecast, which excludes an estimated A$1 million-$2 million loss from the Melbourne cannery, Somasundaram added the market was probably already expecting this going by Wednesday’s share spike.

A Bellamy’s spokesman attributed Wednesday’s about 12 percent rise to sector strength, noting rivals a2 Milk Co Ltd and Bega Cheese Ltd had risen for the week.

A spokesman for the Australian Securities Exchange said the market operator had noted the shareprice gains in the sector and was “monitoring the situation closely”.

By 0422 GMT, Bellamy’s shares were up about 5 percent at A$10.28, having risen to A$10.60 earlier, their highest since December. The broader S&P/ASX 200 was mostly flat. ($1 = 1.2840 Australian dollars) (Additional reporting by Ambar Warrick in Bengaluru; Editing by Himani Sarkar)

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