Why the Keytone Dairy share price opened 9% higher this morning

The Keytone Dairy Corporation Ltd (ASX: KTD) share price opened 9.09% higher this morning on the back of a sales update.

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The Keytone Dairy Corporation Ltd (ASX: KTD) share price is racing higher this morning on the back of a sales update.

Keytone Dairy is a manufacturer and exporter of formulated dairy products in Australia and New Zealand.

The company manufacturers its own products under its KeyDairy, KeyHealth and FaceClear brands. These products include premium milk and nutrition powders and health supplement capsules for the treatment of acne. 

Additionally, Keytone is a production partner for leading retailers and supermarket chains, undertaking contract packing operations for brands around the world.

Headquartered in the heart of New Zealand's South Island, Keytone Dairy floated on the ASX in July 2018 at an offer price of 20 cents. With a share price of 29 cents at the time of writing, the company's market capitalisation currently sits at around $74 million.

Why is the Keytone Dairy share price surging?

This morning, Keytone Dairy revealed that it has received its largest follow-on order from Chinese customer, Nouriz to date.

Nouriz is a related party of China Animal Husbandry Group, a China state-owned enterprise, that orders whole and skim milk powders from Keytone for its Nouriz private label.

The large purchase order announced today is priced at $1.39 million and is significantly higher than Nouriz's recent orders and forecasts. More specifically, this latest order is around 11.3 times and 1.6 times greater than Nouriz's first and second orders, respectively.

The order will be manufactured in Keytone's New Zealand facilities in August 2020.

Commenting on today's update, Keytone CEO Danny Rotman said:

"These significant follow-on orders from strategic clients of the business are increasing in both frequency and size. With the New Zealand second manufacturing facility online, Keytone is well equipped to service these growing orders from Nouriz and other key strategic clients of the business and will continue to work closely with these clients, growing the product offering and volumes."

Recent developments

Today's announcement follows another positive update in late May regarding a new licensing agreement. The agreement gives Keytone a distribution license for a range of Baileys ready-to-drink dairy products products in Australia, New Zealand, Hong Kong and Taiwan.

Additionally, the next day, Keytone announced its full-year financial results for the 12 months ending 31 March 2020.

Headline results include total sales revenue of $22.53 million, up 799% from $2.51 million in the prior year, and cash receipts of $24.68 million. However, the company reported a full-year statutory loss of $7.45 million, up from a loss of $3.29 million in the prior year.

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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