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10:46
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Originally posted by Tahora:
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A2 Milk hits Synlait with more claimsVALERINA CHANGARATHILDairy business partners A2 Milk and Synlait's sparring over contracts and prices continues with the former slapping new claims in the midst of separate arbitration proceedings.In a long pre-Christmas update on Friday that will hardly cheer investors, Synlait says more issues are now on the table for a third-party arbitrator to work through.Exclusive discussions have been ongoing for months after A2 Milk's notice of cancellation of its exclusivity arrangements with Synlait under the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) for a2 Platinum® and other nutritional products. The negotiations will also now include whether Synlait's obligation under the deal to procure a minimum annual volume of product and if certain priority arrangements for A2 Milk "will cease to apply if the exclusivity provision" is found to have been validly cancelled. The arbitrator will also look at what, if any, intellectual property under the NPMSA, and related know-how in the products, is owned by A2 Milk and which party is responsible for certain one-off airfreighting costs.A separate good faith negotiation that was continuing over pricing of products manufactured by Synlait has now expired and is heading for confidential binding arbitration. "The resolution of this matter is important because it could impact the margin for certain products manufactured under the NPMSA historically and going forward," Synlait says in its note. Meanwhile A2 Milk has sent a notice of further potential claims, including costs associated with product services, surplus or damaged packaging materials costs, new product development, lost profit on delayed deliveries, and alleged failure to share cost savings from the use of third-party ingredients. "The a2 Milk Company has not asserted any monetary loss in its claims at this stage. The parties are underway with good faith negotiations to attempt to resolve these matters."Synlait, which has forecast a worse first half than the previous year, remains of the view that "together both companies stand the best chance of weathering the China market dynamics". It has also reiterated its hold on the Chinese State Administration for Market Regulation (SAMR) licence to make A2 Milk's Chinese labelled infant formula (stages one, two and three) until September 2027. "Synlait continues to support The a2 Milk Company as its major customer," it says. Synlait shares last at 93c on the ASX; A2M at $4.26. From the Australian this morning.
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It looks like at Synlait they are quite desperate and realized that their chances to win the dispute are minimal and now trying to re-negotiate other aspects of the contract in case they lose to minimize the damage. Effectively now they are trying to re-negotiate whole contract. And their reliance on continuing to support from Bright Dairy can only make me smile. Chinese don't like do business with losers and never show their real intentions.
(20min delay)