Wattle Health inks breakthrough JV deal with state-backed Chinese dairy company

Wattle Health inks breakthrough JV deal with state-backed Chinese dairy company

In a year marked by a freefall in its share price, infant food producer Wattle Health (ASX: WHA) has now reached a collaboration agreement with leading Chinese nutritional dairy company Nouriz.

Nouriz, whose biggest shareholder is state-owned enterprise China Animal Husbandry Group (CAHG), will form an Australia-based 50/50 joint venture (JV) with Wattle Health to manufacture and sell a range of certified Australian organic nutritional dairy products.

The products will be sourced from Corio Bay Dairy Group (CBDG), itself a joint venture between Wattle, Organic Dairy Farmers of Australia and Niche Dairy.

"With this agreement we have secured an exceptional and experienced partner to market and distribute in China a range of certified organic premium milk powder products," says Wattle's chairman Lazarus Karasavvidis.

"Nouriz has a strong on the ground presence and deep experience in selling premium dairy products in the China market.

"With the Corio Bay spray drying facility on track for completion in the first half of 2020, the new JV will have access to a range of high-quality organic powders for sale into the China market."

Nouriz (Shanghai) Fine Food Co chairman Liu Ning says Chinese consumers consider dairy products from Australia to be premium due to the quality systems from farm to market.

"China recognises Australia as a country that has very good farming land with a history of exporting high quality dairy products," says Liu.

"Nouriz are excited to be collaborating with Wattle Health and Corio Bay Dairy to develop a range of premium organic consumer products from Australian organic milk for Chinese consumers."

The announcement comes at a difficult time for the company, whose shares have lost around half their value since January and almost 80 per cent since early 2018.

On 30 September the group announced a trading halt that was supposed to be lifted by 2 October, however two days later shares were voluntarily suspended from quotation.

Last Friday the company released a quarterly update noting it was still working towards finalising the acquisition of a majority stake in manufacturing facility Blend and Pack, a Victorian site that was one of the first to receive CNCA accreditation from Chinese authorities.

The group noted "significant progress" in the quarter with the launch of its new premium brand Uganic in the Australian market, however sales were low due to production delays.

"The company anticipate [sic] for sales to increase quarter on quarter as brand awareness and distribution channels are developed both domestically and internationally," Wattle said.

"Production and manufacturing costs were higher due firstly to the brand redesign and relaunch of Little Innoscents across numerous distribution channels, including Chemist Warehouse and Big W. 

"The increase in staff costs occurred as CDBG continued to build its team as it prepares for operations in the first half of 2020. The main item for administration costs in the quarter were one off expenses related to the proposed transaction for the acquisition of B&P.

WHA had around $18.5 million in the bank at the end of the quarter.

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