JAT inks distro deal for over $7.5M single product revenue

Published at Jun 26, 2018, in Small Caps

JAT Energy (ASX:JAT), a China-Australia cross-border specialist in Fast Moving Consumer Goods (FMCG) exports, this morning revealed it has penned a distribution agreement with Cyclone E-Commerce Co., Ltd.

This deal will see Cyclone purchase over $7.5 million in product from JAT over the next 12 months — considerable revenue for a single product.

Cyclone is a distributor based in Hangzhou City, Zhejiang and is part of the London-based Gingko International Limited group. Cyclone uses proprietary cross-border e-commerce platforms and bonded warehouses to deliver global products to Chinese consumers.

Cyclone supplies global maternity and baby brands, health products, snacks, and skincare products through the Hipac, Momtime and other maternal and baby platforms, as well as to O2O experience stores and micromarts. O2O refers to the business strategy of “online-to-offline”, which draws potential customers from online channels to make purchases in physical stores.

Under this distribution agreement, Cyclone agrees to purchase 300,000 tins of NEURIO — Lactoferrin Milk Powder from JAT over a 12-month period at the best market price. Cyclone has exclusive rights to sell the product on the Hipac and Momtime platforms.

The agreement runs for 12 months, which can then be extended. Cyclone must make full payment for all orders prior to shipping by JAT.

As always, it should be noted that JAT is an early stage play and anything can happen, so seek professional financial advice if considering this stock for your portfolio.

NEURIO – Lactoferrin Milk Powder is a product supplied by Sunnya Pty Limited. As previously announced to market, JAT is acquiring 51 per cent of Sunnya, subject to shareholder approval in August.

Sunnya has agreed to supply to JAT all of the Neurio product required for the Cyclone agreement over the next year, regardless of whether the acquisition proceeds.

Executive chairman, Tony Crimmins, said: “This transaction brings in more than $7.5 million in revenue over the 12 months. That’s quite pleasing for a single product with a single customer.”

“Just as important, it’s confirmation of our strategy of combining Sunnya’s products with JAT’s distribution capacity. NEURIO – Lactoferrin Milk Powder is an attractive product in China and the orders are starting to reflect that,” added Crimmins.

This announcement comes on the heels of another piece of salient news for JAT — its announcement last Friday of another distribution deal with Australian Huibao International Group Limited. Huibao is an Australian-owned company which operates a ‘Community O2O’ business in five regions of China. Huibao has placed its first order with JAT for 960 tins of NEURIO – Lactoferrin Milk Powder. JAT will purchase the products from Sunnya for resale.

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