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The stock price of Bubs Australia Ltd (ASX: BUB) skyrocketed on Monday morning.
At the opening, the shares of the children’s formula company have risen 77% to a 52-week high of 86 cents.
Why is the price of Bubs shares rising?
Investors have raised the price of Bubs shares today after the company announced a major deal with the United States.
According to the statement, Bubs will ship more than 1.25 million cans of infant formula to help alleviate the shortage across the country. This shortage has been caused by a major product recall and the closure of a plant operated by Abbott Nutrition in response to rare bacterial infections.
It looks like this will be a big boost for Bubs’ financial performance, which has seen the company report a major cash crunch for years. And with U.S. President Joe Biden tweeting his thanks to Bubs, he is certainly giving the company the most publicity it will ever receive.
I have more good news: 27.5 million bottles of safe infant formula made by Bubs Australia arrive in the United States.
We are doing our best to get more formula on the shelves as soon as possible.
– President Biden (@POTUS) May 27, 2022
Now what?
The statement said the shipment of 1.25 million cans is the equivalent of at least 27.5 million bottles and will include cow’s milk and infant formula with goat’s milk.
500,000 cans are ready for immediate export, with the remaining 750,000 cans now in production and are expected to be ready in the coming months.
Bubs also revealed that it is well positioned to triple its current annual capacity of 10 million tin in its FDA-registered production facilities if demand continues to rise once the shortage ends.
It is important to note that in the meantime, the company has stressed that its supply to existing Australian retailers and export markets will remain unchanged despite its agreement with the Biden Administration.
Management comment
Bubs CEO Kristy Carr commented:
Bubs has a unique position with an existing sales and distribution footprint across the country, allowing us to store shelves with existing and potential retail partners quickly.
Bubs already has the relationships and processes needed with customers to support the initiative, including supply and distribution logistics, and the right insurance and Aussie Bubs Advisory Board to help American families. This foundation is a reflection of our long-term commitment to the U.S. as a strategic priority for the company, building on our 17 years of experience in child nutrition to ensure strict standards and control measures. quality to support the launch.
Bubs President Dennis Lin acknowledged that the company was fortunate to have entered the U.S. market during a period of shortage.
Bubs had identified the U.S. as a key strategic market two years ago, and our investment commitment has fortunately coincided with the time of need for American families. This allows us to accelerate our strategic vision and provide support that goes to the heart of Bubs ’DNA.
Time will tell if this is a short-term increase in sales or the start of something special in the US market.