Revenues from customers over the quarter to 31 December 2017 were consistent with the previous quarter ($800,000 compared to $799,000) and profit margins remained similar. Manufacturing and operating costs rose from $729,000 to $934,000 as a result of timing differences and a significant down payment on milk powder production, the revenues from which are expected to be booked in the March 2018 quarter. Administration and corporate costs rose (from $159,000 to $257,000) as the company developed the infrastructure to support business growth.
A successful capital raising brought $2.719 million into the company, net of costs, from new shares issued. The cash at bank accordingly increased from $108,000 to $2.438 million ensuring that the company is well funded for its working capital requirements. Since the end of the quarter the company has raised over $1 million in additional capital following an Extraordinary General Meeting.
As announced during the quarter, wholly owned subsidiary Cobbitty Country has entered into an agreement to purchase 51% of Golden Koala Group Pty Ltd (“GK”), subject to shareholder approval at a general meeting to be held in February. GK is an Australian milk powder brand, its primary product being “Golden Koala Infant Formula”. This transaction represents a key development in JAT’s strategy to transition from low margin trading of third party products to selling JAT owned products at substantially higher margins.
GK has an established track record of selling milk products in China and previous CFDA approval. GK has secured an agreement with Nutritional Choice Australia Pty Ltd (“NCA”) to manufacture premium infant milk formula for export to China. NCA is one of only 15 Australian manufacturers currently accredited by the CNCA (Certification and Accreditation Administration of the People’s Republic of China) to export infant formula into China, and from 1st January 2018, each manufacturer is licenced for a maximum of three formulations. This means GK’s formulation will be one of only 45 (currently) which can be sold ‘offline’ – in Chinese shops and supermarkets.
With this licensed manufacturing capacity now in place, GK will next apply to renew its China FDA approval, with JAT’s assistance. Given JAT’s extensive working relationship with Chinese regulators, the Board is confident of GK achieving approval in 2018.