The Bubs Australia Ltd (ASX: BUB) share price has surged higher on Friday after the release of a positive announcement.
At one stage the goat milk infant formula company's shares were up as much as 10% to 48.5 cents.
They have since given back a lot of these gains, but still sit 3.5% higher at 45.5 cents at the time of writing.
What did Bubs announce?
This morning the company announced that it has secured additional goat milk supply with Central Dairy Goats, which represents an established group of goat dairy farmers on the North Island of New Zealand.
The release explains that the agreement guarantees a minimum supply volume of 2.2 million litres through to May 2019 and 6.2 million litres for the following year.
Both parties are reportedly keen to grow beyond these volumes in succeeding years, with the agreement due to run for 5 years. It also includes the option of a further term of 5 years.
CEO Kristy Carr advised: "This new partnership provides Bubs Australia guaranteed access to an additional milk pool in excess of 6 million litres of premium New Zealand goat milk per annum for our CapriLac range of adult milk powders, which will enable Bubs infant formula to be made entirely with Australian goat milk; a world first."
She added: "The agreement, together with our existing exclusive sources, means we have now secured access to the milk supply from 30,000 goats across Australia and New Zealand, producing circa 20 million litres of fresh goat's milk, allowing us to fulfil our increasing growth trajectory and further reinforcing our farm gate to finished product provenance story."
Should you invest?
While I think this is a positive move by the company, I wouldn't make an investment decision purely on the back of it.
Instead, I would suggest investors wait and see how the company performs in the coming quarters, especially in respect to its bottom line. Although its sales have been growing strongly over the last 12 months, so have its losses.
Because of this, I would stick with established players such as A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL) for the time being.
