THE share price of infant milk formula manufacturer Wattle Health has plummeted more than 30 per cent after the company finalised a long-awaited deal with Organic Dairy Farmers of Australia.
Wattle Health went into a trading halt on the Australian Securities Exchange on April 6, when the share price was trading at $2.26.
Four days later, the company announced it was entering into a joint venture called Corio Bay Dairy Group with ODFA to build an organic milk spray drying plant in Geelong.
Wattle Health said it and minor partner Niche Dairy would raise $70 million to build and operate the plant while ODFA agreed to supply a minimum 46 million litres of organic milk each year.
Wattle Health would market dried milk products from the drying operation under the True Organic brand licensed by ODFA.
But it took until this week to finalise the deal and allow Wattle Health shares to begin trading again on the ASX.
Wattle Health announced this week it would raise about $77.9 million through a $20 million institutional placement, a share offer to shareholders and a $20 million loan.
Investors holding shares as at 7pm on Thursday would be entitled to buy one share for each five held at $1.25 — about $1 less than the price on April 6.
The Wattle Health share price fell to as low as $1.525 today — a 32.5 per cent discount to the April 6 price and the lowest level since December last year.
Wattle Health executive chairman Lazarus Karasavvidis said the plan was to build a “truly vertically integrated Australian organic nutritional dairy supply chain” to capture a large slice of the growing demand for organic nutritional dairy powder.
“With funding now secured to build the CBDG organic nutritional spray dryer and with Wattle Health having first right over the organic powder produced from that organic spray dryer, Wattle Health is in a strong position to capitalise on the opportunity to become a leading Australian organic nutritional dairy company,” Mr Karasavvidis said.
Wattle Health listed on the ASX in March last year.
It sells non-organic infant formula, nutritional products and milk powder and organic skin care products to China, Macau and India, along with sales in Australia.
It plans to produce non-organic baby foods, goat infant formula and a range of dairy products manufactured from imported European organic milk powder this year.
Wattle Health said the $55 million organic spray dryer would be capable of processing 10,000 tonnes of dried milk powder annually.
It is not expected to be completed until about September next year.
The CBDG plant planned to build to about 10,000 tonne capacity by 2021-22.
ODFA has about 50 farmers producing organic milk, mostly in Victoria.
By: PETER HEMPHILL
Source: The Weekly Times