Wattle Health Australia Limited’s (ASX: WHA) shares sky rocketed 29.78% on June 29, 2018, before market close, as the company announced about signing a deal with a Chinese company, Shandong Weihai Port International Trade Co Ltd (Shandong) for supply of WHA’s conventional cow infant formula range. This agreement is subject to the WHA receiving formal accreditation from State Administration for Market Regulation for its conventional cow infant formula and the signing of the formal supply agreement.
Under the agreement with Shandong, the company expects cumulative revenue of around $34.0 Mn over three years, comprising of $6.6 Mn for the first year, $11.5 Mn for the second year, and $16.5 Mn for the last year under the initial term.
Further, the management stated that the extension of the agreement and volumes after the third year will be negotiated at the expiry of this agreement, but to continue this agreement, the volumes must not be less than the guaranteed volume for the last 12 months.
The objective of this agreement is to increase the sales pipeline following the recent agreement with International Supplies and Distribution Company (ISDC) announced to the ASX on 5 April 2018. The revenue from the ISDC agreement is expected to be more than A$100 Mn across a 3-year period and is backed by a bank guarantee.
According to the management, the deal with Shandong is another important milestone for Wattle Health for the company to build its brand awareness in the Chinese market.
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