China's Bright Food Group, a cornerstone stakeholder in local processor Synlait Milk, is likely to get a boost from Fonterra's food scare and might get a credit rating upgrade from Moody's Investors Service.
Fonterra is the biggest milk powder supplier into China with about 60 per cent market share, and last week's food safety scare is seen as credit positive for Bright Food's Baa3 credit rating with a stable outlook, Moody's said in a statement. The New Zealand dairy exporter discovered bacteria that can cause botulism, which sparked a recall of potentially tainted food and prompted Chinese authorities to suspend imports of affected products.
"The incident is credit positive of Bright Food, which operates its dairy business through Bright Dairy & Food Co, a 65 per cent Shanghai listed company and is one of China's top three dairy producers by revenue," Moody's senior analyst Alan Gao said.
Moody's expects Fonterra's operations will be disrupted and its brand image tainted, and that will "likely drive consumers from those brands in trouble to leading domestic brands," the rating agency said.
Last week, Synlait Milk, which listed on the New Zealand stock exchange last month, said it didn't use any of the affected Fonterra product. While it expected to face some disruption to trade and additional testing in the short-term, it downplayed any long-term impact on its growth aspirations.
