The Eagle Health Holdings Ltd (ASX: EHH) share price opened 24.32% higher this morning following the announcement it is expanding production of disposable medical masks.
New production lines are being added at the company's facility in Xiamen, China, increasing production capacity to ~300 million units per annum. At the time of writing, Eagle Health shares are trading 13.51% higher for the day at $0.21 per share.
Medical mask production
Eagle Health has purchased and begun commissioning automated industrial machinery and raw materials for the high-speed production of disposable medical masks. The first two production lines are currently in trial production with four additional lines being commissioned.
Medical mask production capacity at Eagle's facility is ~6,500 masks per hour per line. With all six lines at full production capacity, Eagle Health will be able to produce ~300 million masks per year. New machinery has been acquired at a cost of $1.2 million which will be paid in cash.
Masks are being manufactured to the standards of the People's Republic of China Pharmaceutical Industry Standard and in accordance with the State Food and Drug Administration standards.
Medical mask market
In response to the coronavirus outbreak, China's authorities have imposed compulsory mask-wearing protocol in public places across most provinces and major cities throughout the country. China's mask supply is regulated by the National Development and Reform Commission, the country's economic planning agency.
There is currently a global supply shortage of medical masks, which have become a high demand commodity in China with demand growing in other world regions. Eagle Health is now well-positioned to contribute to fulfilling the shortage of supply.
Purchase orders
Eagle has secured its first order for medical masks for 3.2 million masks. A partial upfront payment for the order has been received and production has commenced. The order is expected to take 10 business days to complete.
Additional smaller orders have been received from other purchasers including government agencies. Eagle Health is in the process of securing further large orders from various parties in China and internationally.
Distribution agreement with Zoono
In February, Eagle health entered a distribution agreement with Zoono Group Ltd (ASX: ZNO) to distribute Zoono's products in China. Recent tests results have shown that the technology used in Zoono's hand sanitiser is 9.99% effective against coronavirus.
Eagle and Zoono will have a co-branding arrangement whereby Eagle will import Zoono's product in bulk and then label, package, and distribute the products from its facility in China. Eagle's distribution network places Eagle's products into around 30,000 outlets across China.
Foolish takeaway
Eagle Health is ramping up efforts to meet growing demand for hygiene products to protect against coronavirus. The company looks set to capitalise on the demand in China and worldwide, along with these other ASX shares fighting the spread of the virus.
