A2 Milk's chief executive for Asia Pacific, Peter Nathan, has poured cold water on suggestions the company may hit a snag with new cross-border regulations in China, and dismissed criticism of recent share sales by top management as a "significant over-reaction".
China introduced new laws covering cross-border e-commerce (CBEC) trade into China in on August 31 and the grace period for existing regulation runs out on December 31.
The cross-boarder e-commerce, and unofficial "daigou" trade channels are important platforms for a2 Milk's infant formula sales into China. Soon after China announced the change, a2 Milk said it expected more guidance to come from the authorities.
Brokers Craigs Investment Partners estimated about 33 per cent of a2 Milk's infant formula volume flows through the CBEC channel.
"The company will continue to work proactively with its partners to respond to the new e-commerce law and the yet-to-be released implementation guidance as appropriate," a2 Milk said early last month.
Nathan told the Herald this week the company's view remained "entirely consistent" with its September announcement. He believed the grace period for new rules would be extended beyond January 1.
"The key motivation for the regulator, firstly, is to ensure that there is sufficient supply of what is an extraordinarily sensitive category, given the fact that it keeps babies alive," Nathan said.
"They need to ensure that there is no disruption of supply in what is a very large channel. Secondly, they need to ensure that there is sufficient regulation in the market place," he said.
Nathan repudiated market commentary that the company may strike issues with its product labelling.
"The insinuation was that if it was not Chinese labelling, then it would not be allowed to be sold through the channel, which we would totally dismiss," he said.
"The issue is around the English label product, which is still being sold via the cross-border e-commerce channel and daigou, which again we are very comfortable with," he said.
A2 Milk's formula is fully registered with the Chinese authorities, unlike some brands, he said, adding that adverse sharemarket reaction to regulatory changes had been a feature of this category for many years.
New chief executive Jayne Hrdlicka last month sold all her shares in the company, for tax purposes, after two months in the job, sparking a drop in the company's share price and criticism from the share broking community.
A2 Milk has said that execution of time-based rights and performance rights would lift Hrdlicka's holding beyond her original stake.
Nathan said there had been a "significant over-reaction" to the share share sales. "Both management and the board continue to hold a significant amount of stock," he said.
Shares in a2 Milk traded yesterday at $10.22, down from $12.51 just before the share sales were announced on September 21.