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Is it time to buy Freedom Foods shares after today’s update?

In morning trade the Freedom Foods Group Ltd (ASX: FNP) share price has pushed higher following the release of an update on its nutritionals activities at its Shepparton site.

At the time of writing the diversified food company’s shares are up slightly to $4.70.

What was in the update?

This morning the company advised that it has completed a key commissioning step in relation to Lactoferrin production at its new Nutritionals capability at Shepparton.

Lactoferrin is a protein found in both cow’s milk and human milk. It plays a key role in the function of the immune system, helping to safeguard the body against bacterial, fungal, viral, and other pathogens.

Other benefits include promoting beneficial bacteria in the intestinal tract and regulating iron metabolism.

According to the release, the company has an initial installed capacity of 16 tonnes of Lactoferrin per annum. Based on progress through this important commissioning step, it expects sales of Lactoferrin to commence late in the fourth quarter FY 2019.

Pleasingly, Freedom Foods has advised that there has been a lot of interest in its Lactoferrin capacity and expects to sell its available capacity into FY 2020.

In addition to this, the company advised that its Micellar Casein production commenced in February and production of Native Whey Protein Isolate has now started. These proteins represent the purest, undiluted dairy protein source for use in high quality applications across infant, medical, sports, and weight management.

Interest has been high for both these products and the company expects the facility to move to full capacity during FY 2020.

All in all, management expects the Nutritionals segment to deliver a material earnings contribution in FY 2020.

In the first half of FY 2019 the Nutritionals segment was the company’s smallest with revenue of $9.1 million. This equates to just 4.3% of the company’s total half year revenue of $209 million.

But these developments are likely to bolster the segment’s revenue greatly and make it a much bigger contributor in FY 2020.

Should you invest?

I think Freedom Foods is a quality company with significant long term growth potential.

This could make it worth considering along with industry peers A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Bellamy's Australia and Freedom Foods Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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