An isolated look at the demand side cannot really be a forward...

An isolated look at the demand side cannot really be a forward indicator as it’s a real time only, I don’t doubt that a2 is still in demand, the question for FY17 is how much of a drop, albeit a limited duration drop, in growth will occur due to the expected regulatory change implementation.

What Comvita CVT showed us yesterday is that it is even possible we could see a drop in sales not just a drop in growth.

The production side figure, as Synlait forecast of 12.5% growth will be based on an assessment of customer forecasts for the FY17 outturn, although even A2M and others must have unknowns to assess in making these forecasts.

Investors should take note from SML and CVT respectively, as the A2M presentation, in all likelihood, may very well read similarly in just a few weeks time;

SYNLAIT:

“Proposed Chinese regulations likely to moderate canned infant formula growth in FY17 as disruption works through industry wide supply chains but normalise in the longer term”. “As a result our profit expectations (infant formula) for FY17 show only modest growth with meaningful improvements expected in FY18”

https://www.nzx.com/files/attachments/243914.pdf

COMVITA:

“For the first quarter ended 30th September 2016, we have experienced tough trading with sales significantly lower than the prior year.” “This lower than expected sales over the last few months is entirely a result of the slowdown in the NZ and Australian informal trade channels into China resulting from the impact of regulatory changes by China.” “The first half result ending 31 December 2016, is expected to be a loss”

https://www.nzx.com/files/attachments/246731.pdf