Great article that hits the nail on the head after the excitement about the prohibition report a few weeks ago.
Naysayers will immediately say, oh, but that report was about medicakl cannabis and this is all about hemp and nothing to do with medical cannabis.
They’d be correct in simplistic terms but essentially this hemp today story illustrates that Australia has failed to build a hemp industry of any note over the past decade and only has a medical cannabis industry that relies on importing white label medical cannabis (in the main from Canada) and re-selling it at huge margins to a questionable “medical market”.
Yes some medical cannabis is grown in Australia and some of those growers actually know what they are doing and produce world class product. We’ve noticed if they are producing world class product they tend to export it and not sell it in the domestic market.
With regard to this particular deal take a look at the numbers when you read it. It’s all very small fry and in the US probably would even cover the lawyers and accountants fees.
As I said earlier in the year the Australian Hemp & Cannabis sector is in the main smoke and mirrors just as it has been for the past 7 or 8 years.
Yes, some money is being made by canny share price watchers and at the moment lots of money is being made by some medical, I’ll call them retailers, who are essentially doing what the black market are doing. Bringing in cheap overseas product, branding it and flogging it out at vastly inflated prices.
Later this year we”ll see more slaps on the wrist from the TGA for thos medical producers who push the boundaries of advertising (again) but as the bard said, “Something is rotten in the state of Denmark”. As we know that’s a play that doesn’t end well for anybody.
The sooner both hemp and cannabis are taken seriously in Australia the better outcomes there will be for the individuals and companies involved, medical patients, adult use users and wider society in general.
HEMP TODAY
Two struggling Australian hemp companies have struck an AU $3 million (US $1.94 million) deal involving a hemp food company. Elixinol Wellness Limited has agreed to acquire the Ananda Food unit of Ecofibre Limited.
Elixinol, primarily a maker of CBD products but also the owner of Hemp Foods Australia, is to pay Ecofibre AU $2.0 million in cash in late March, and the seller can earn an additional AU $1.0 million if sales goals are reached for its cat litter product that is part of the deal. The earnout applies to sales between April 2024 and June 2025.
Elixinol shares diluted
Elixinol shareholders will get hit with a major dilution under the company’s plan to raise AU $3.16 million to cover the transaction by issuing approximately 632 million shares. That almost doubles the number of shares in Elixinol, and the company will issue the new securities at a 50% discount to the last traded share price of one cent per share on Feb. 9.
Elixinol said the funds raised will be used primarily to support the acquisition, but also for marketing and as working capital.
Both of the Sydney-based companies, which are traded on the Australian Securities Exchange, have struggled since the heady days of the CBD boom in 2018-19.
Ecofibre’s woes
Ecofibre, which also has business in sustainable polymers and natural materials, and health care products, lost AU $13.2 million on revenues of AU $32.5 million in its fiscal year that ended in June 2023 after losing AU $17.2 million the previous year on revenues of AU $31.3 million.
The company’s shares are now trading at less than AU $00.10 (10 cents), down from an all-time high of AU $3.65 in November 2019 when the company was considered a “unicorn” with a valuation of more than AU $1 billion.
Ecofibre’s Ananda Food unit saw its income drop from AU $3.6 million to AU $2.2 million between 2022 and 2023. All of last year’s income was wiped out when a planting seed shipment to the U.S. was damaged, costing the company AU $3 million, according to Ecofibre’s last financial report.
The company’s fall in fortunes forced the ouster last November of long-time Ecofibre CEO Eric Wang, who resigned after more than seven years with the company he had struggled to restructure. Ecofibre’s massively inflated valuation has fallen by 95% since 2019 – to just AU $50 million now.
Elixinol stumbling
Elixinol lost about AU $3.4 million on income of AU $3.4 million in the first half of 2023, compared to a loss of AU $7.1 million for the analog period in 2022. Total losses in 2022 were about AU $10.6 million.
The company’s shares are currently selling for AU $0.008 (8/10 of one cent), compared to an all-time high of around AU $4.50 in May 2019.
Elixinol, which at one point was trying to offload its Hemp Foods Australia unit, now appears to be doubling down on the sector. It gains Ananda’s intellectual property rights to hemp seed genetics in CBD, fiber and grain, which are sold to domestic growers in Australia as well to farmers in the U.S. Ananda’s asset portfolio also includes hemp flour, hemp protein, hemp seed and hemp seed oil products – and customers that include key Australian retailers Woolworths Group and Coles Group.
Elixinol shuttered its operations in the European Union and the UK in 2021, saying it would focus its attention on the U.S. and Australian markets. As part of that retreat, the company nixed a deal made in early 2021 to buy German CBD company CannaCare Health GmbH for €9 million. The company has been beset by turmoil in its management and boardroom ranks since that time.
‘Complementary’ asset
Ananda Food “is complementary to our existing hemp product range and will bring improved unit economics through increased production yields and asset utilization and create opportunities for significant cost and revenue synergies,” according to Elixinol group CEO and managing director Ron Dufficy.
Ecofibre Group Chairman Vanessa Wallace said her company is spinning off Ananda Food because it is too small to deliver near-term cash profits.
Ecofibre retains its CBD unit, which goes by the name Ananda Professional. That company saw sales remain flat at roughly UD $13.0 million between the 2022 and 2023 fiscal years. Growth was limited by the loss of a contract to supply CBD products to giant U.S. pharma retailer CVS, the company said.
Struggling Australian hemp companies strike a $1.9 million deal on food maker
