The Beston Global Food Company Ltd (ASX: BFC) share price has been one of the biggest movers on the market today following the release of a major announcement after the market closed yesterday.
In early trade the food company's shares catapulted higher by over 43%. Since then they have given back some of their early gains, but are still up 29% to 27 cents at the time of writing.
The reason for the buying frenzy was news that the company had signed a supply agreement with China-based meat producer Chongqing Hondo Food Company Limited. The total supply contract value is expected to be worth 120 million renminbi ($22 million) for Beston Global Food.
Shipments of products in the initial purchase order will start immediately and is expected to be completed over the next eight months.
Pleasingly for Beston Global Food's shareholders this could be the start of greater things. Chongqing Hondo has stated that it expects the popularity of these products to result in its orders eventually reaching as much as 500 renminbi ($91 million) per annum.
Beston Global Food's CEO Sean Ebert believes that this agreement allows the company to proceed with confidence in expanding current production capacities at its numerous factories. In light of this, the company will focus on optimising performance to increase its product output.
Should you invest?
Whilst this is certainly a positive development, I wouldn't be rushing to buy shares just yet. As well as this announcement, the food company announced its less than impressive first-half results.
Although sales rose strongly, the company posted another half-year loss of $2.6 million. Management blamed this on seasonal impacts on milk processing and lower China sales due to a re-positioning of the China business.
For now I would suggest investors leave Beston Global Food on their watch lists and focus on profitable food companies such as a2 Milk Company Ltd (Australia) (ASX: A2M) and Capilano Honey Ltd (ASX: CZZ) instead.
