Vancouver-based hemp food, oil, fiber and bulk producer HempCo Food and Fiber Inc. (HEMP:TSX), (HMPPF:OTC)— a 52% owned subsidiary of Aurora Cannabis—is taking new strategic directions to correct its recently reported revenue decline in 2018.
Revenue for the full year ended August 31, 2018 was $2.2 million, compared to $6.5 million for the previous full year in 2017.
The revenue decline reflected its exit from the negative margin Korean market. Revenues were also affected by short-term by quality issues at its Manitoba processing facility and the transition of a US client.
It had small revenue gains from its higher margin consumer-packaged goods product lines PRAISE and PLANET HEMP.
After hitting a low of $0.63 in December, HempCo stock has climbed back to $0.94, a nearly 50% increase.
Management’s new initiatives include:
New Nisku Facility
HempCo anticipates growth in the coming quarter as a result of its new Nisku facility coming online. The new facility will enable it to produce more bulk hemp products and more high-margin product lines PLANET HEMP and PRAISE. It will accelerate revenue development, secure product sourcing, reduce costs and improve quality issues experienced in 2018.
HempCo is building new global markets for its bulk hemp products and its two brands, Planet Hemp Superfood and Praise. Management anticipates further expansion in Canada, New Zealand, UK, USA and other markets.
It will focus on product innovations to expand into new consumer categories and market segments. New products are planned into 2020 under the brands Planet Hemp Superfood, Praise, Planet Hemp, and Hempco.
Whole plant utilization
To maximize efficiency and revenue, HempCo will further move toward whole plant utilization, using hemp to develop ”tri-crop” opportunities for 1) hemp-based foods, 2) fiber and 3) nutraceuticals. Its new hemp fiber and processing capacity at the Nisku facility will extract fibers from the hemp "stalk" for sale to businesses, bringing in new revenue.
CBD Oil production
Under the new Cannabis Act passed in October, 2018, HempCo expects to be able to start processing hemp for the extraction of CBD oils. HempCo estimates it can produce over 5 million pounds of chafe, flowers and leaves for potential sale through its farmer contacts, which would benefit it, as well as hemp farmers and its partners, Aurora and Aurora`s extraction partner, Radiant Technologies.
Aurora Partnership Benefits
Aurora now owns approximately 52.3% of Hempco. Aurora recently provided a loan in the form of a convertible debenture to Hempco for working capital purposes. To date Aurora has provided $3 million, with a total facility size of $5 million expected.
By leveraging Aurora`s expanding infrastructure and partners, HempCo expects to accelerate its commercial development into new markets and revenue streams.
HempCo strengthened its management team with additions in operations, sales and finance. The additions provide further leadership and bandwidth to drive growth going forward.
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Source HempCo press release