Wattle Health Australia Limited (ASX: WHA) announces the finalisation of its legally binding supply agreement with the International Supplies and Distribution Company (ISDC) to supply its standard infant formula product range to the Chinese market.
Under the agreement, ISDC has guaranteed a total of 5,200,000 units over 42 months resulting in a revenue of approximately A$100 million for the relevant period. Further, following the conclusion of the initial 42-month period, Wattle Health and ISDC will set new volumes annually, which should not be less than that in the previous 12-month period. These volumes will be in addition to the Wattle Health’s existing arrangements in China.
ISDC will provide a bank guarantee of 25% of the production cost to support the minimum orders to Wattle Health under the agreement. If in case the ISDC fails to procure the required volumes for the relevant period, then the present arrangement can be withdrawn. WHA require accreditation from the State Administration of Market Regulation ("SAMR") to address the agreement.
This agreement with ISDC will help the company to expand its product portfolio covering important milestone in its China strategy, especially in categories where regulations are less onerous than for infant formula. In China, Wattle Health has been actively selling baby food with a pipeline of products, such as organic senior nutritional products, fresh organic milk, sports nutrition, and other organic powder-based products.
WHA Executive Chairman Mr. Lazarus Karasavvidis stated that the agreement with ISDC is a positive development for the company as ISDC has extensive distribution channels. Following the SAMR approval, this will help them to expand its extensive retail network within China. They plan to introduce new organic product ranges, capitalising on the strategic relationship they have with the largest fresh organic milk source in Australia, Organic Dairy Famers of Australia.
About the company: Consumer Staple Company, Wattle Health Australia Limited sources, develop and markets wellness products across Australia. Its product range includes Nutritional Dairy range, Nutritional Infant Formula Dairy Range, and WattleBaby Natural Baby Food.
It reported a decrease in its revenue to $363,000 in H1 FY19 due to the transition to Australian organic nutritional dairy products. It reported a decrease in its loss by 66.8% to approximately $4.3 million in H1 FY19 as compared to $13.08 million in H1 FY18. Its net assets were $57.3 million in H1 FY19 as compared to $15 million in H1 FY18 and its working capital increased by 350% pcp to approximately $45 million.
On stock information, Wattle Health’s share last traded at $0.83 up 1.22% (on March 20, 2019) with the market capitalisation of ~$159.49 million. Today, day’s high stood at $0.95 and day’s low at $0.83, with daily volume of 1,905,735. Its 52-week high was reported at $2.657 and 52-week low at $0.800, with average volume of 192,675. Its absolute return for one year, six and three months are -68.21%, -19.21%, and -8.89%, respectively.