(Yicai) July 28 -- Cabio Biotech, a major Chinese supplier of an omega-6 fatty acid used in infant formula, was placed under a risk warning by the Shanghai bourse after overseas regulatory turmoil severely disrupted its operations, sending its shares down 20 percent when trading resumed today.

After a one-day trading halt, Cabio [SHA: 688089], the world's second-largest supplier of arachidonic acid (ARA), slumped 20 percent, the maximum daily decline permitted by the exchange, to close at CNY7.95 (USD1.20) per share today. The stock has lost nearly 70 percent of its value since the start of the year.

The Shanghai Stock Exchange placed the Wuhan-based company under a risk warning today after determining that its production and operating activities had been seriously affected and were unlikely to return to normal within three months under the Star Market's listing rules.

The disruption came after Swiss food giant Nestlé announced earlier this year that ARA oil supplied by one of its major suppliers posed potential quality risks, prompting a precautionary recall of certain batches of infant formula across 31 countries and regions. In February, the European Union also introduced import controls on ARA oil produced in China for use in infant formula.

Recovery Still Under Way

Cabio said in a statement released on July 24 that production plans had been adjusted and various measures implemented to restore operations following negative overseas market sentiment and new regulatory requirements. However, production and sales have yet to fully recover, resulting in a significant deterioration in performance compared with the same period last year.

Cabio expects first-half revenue to plunge 82 percent from a year earlier to CNY55 million (USD8.1 million) and report a net loss of CNY100.6 million (USD14.9 million), versus a net profit of CNY108 million a year earlier.

The company is working to diversify its business while restoring operations. As of the end of the second quarter, it had resumed supplies to core customers in its human health business, secured new major orders in animal nutrition, and expanded cooperation with internationally renowned beauty and personal care brands.

Founded in 2004, Cabio is the world's second-largest supplier of ARA after Swiss-Dutch multinational DSM-Firmenich. It also produces other nutritional ingredients, including docosahexaenoic acid (DHA). Last year, its human nutrition business generated 94 percent of total revenue, while animal nutrition and beauty and personal care contributed 2.5 percent and 0.7 percent, respectively.

Editors: Dou Shicong, Emmi Laine