The Bubs Australia Ltd (ASX: BUB) share price is rocketing higher on Monday morning.
At the the open, the infant formula company's shares are up a whopping 77% to a 52-week high of 86 cents.
Why is the Bubs share price rocketing higher?
Investors have been bidding the Bubs share price higher today after the company announced a major deal with the United States.
According to the release, Bubs will ship more than 1.25 million tins of baby formula to help ease a nationwide shortage. 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.
This looks set to be a major boost to Bubs' financial performance, which has seen the company report significant cash burn for years. And with US President Joe Biden tweeting his thanks to Bubs, it arguably gives the company the biggest publicity it will ever receive.
What now?
The release notes that the shipment of 1.25 million tins is the equivalent of at least 27.5 million bottles and will comprise both cow's milk and goat's milk infant formula.
500,000 tins are ready for immediate export, with the remaining 750,000 tins now under production and planned to be completed in the coming months.
Bubs also revealed that it is well-placed to triple its current 10 million tin annual capacity at its FDA registered production facility if demand continues to build once the shortages end.
Importantly, in the meantime, the company has stressed that its supply to existing Australian retailers and export markets will remain unchanged despite its deal with the Biden Administration.
Management commentary
Bubs CEO, Kristy Carr, commented:
Bubs is uniquely positioned with an existing nationwide sales and distribution footprint, enabling us to stock shelves with existing and prospective retail partners quickly.
Bubs already has the necessary customer relationships and processes to support the initiative, including supply and distribution logistics, and the appropriate insurances and Aussie Bubs Advisory Board to assist American families. This foundation is a reflection of our long-term commitment to the USA as a strategic priority for the Company, drawing on our 17 years of experience in infant nutrition to ensure that stringent standards and quality control measures were in place to support the launch.
Bubs' chairman, Dennis Lin, acknowledged that the company was fortunate to have entered the USA market during a period of shortages.
Bubs had identified USA as a strategic key market two years ago, and our commitment to invest has thankfully coincided with American families' time of need. This allows us to accelerate our strategic vision as well as provide support that goes to the heart of the Bubs DNA.
Time will tell whether this is a short term boost to sales or the start of something special in the US market.
