ECS Botanics achieved record sales in Q2 FY24, reporting revenue of A$7.3 million, up 78% on Q1 and 64% on the previous corresponding period.
The ASX-listed firm said the revenue growth was driven by increased sales of oils and flower from existing customers and two new ones.
Cash receipts from customers were up 62% on Q1 to $6.5m, resulting in another quarter of positive net operating cashflow for the company. This came despite a significant investment in the establishment and planting of 25,000sqm of additional outdoor fields, including irrigation infrastructure, representing a 60% increase in capacity.
The firm ended the calendar year with a cash balance of $2.6m, alongside a NAB facility of $2m which remains undrawn.
An R&D project in one of its Protective Cropping Enclosures (PCEs) recently concluded, with positive results identifying the optimal lighting and heating conditions necessary for consistent year-round cultivation of cannabis flowers.
The trial, conducted between July and October, assessed heating’s effect on yield and potency during colder months, techniques to increase yield and ensure uniformity across batches, and sensors, lighting and climate-control devices to optimise temperature and humidity.
ECS said: “Some of the techniques that provided positive results have already been implemented to ongoing PCE operations which will deliver a significant increase in yield and hence revenue growth from existing assets.”
The R&D project also produced seven new cultivars which went into first commercial production in December to meet customer demand.
As a result of the trial, ECS has confirmed additional funding into lighting and heating for four PCEs, which will be incorporated into a year-round grow cycle.
“We anticipate a 100% increase in production from these PCEs,” the firm added.
ECS said several of its customers experienced significant sales growth in the quarter and subsequently required additional supply from ECS.
New Zealand-based Nubu increased volumes by 50% compared to the prior quarter while Medicann Health, with which ECS signed a $24m binding offtake agreement in October 2023, maintained “solid growth in demand over the quarter, in accordance with our expectations”.
In addition to white-label customers, ECS said it is also producing bulk flower for two other Australian cultivators to supplement their demand.
A trial batch of flower was also sent to current customer Ilios Santé in Germany during the quarter.
Updating shareholders on its own brand strategy, ECS said “administrative delays” in the TGA granting a Good Manufacturing Practice (GMP) certificate to Geocann, the US manufacturer of VESIsorb, has affected the launch timeline for its Avani Rapid CBD capsules.
In June 2023, ECS signed a 10-year licence with Geocann to utilise the VESIsorb technology – a deal managing director Nan-Maree Schoerie said would position the firm as a technology leader in pharmaceutical-grade medicinal cannabis oils.
She said at the time: “VESIsorb increases the bioavailability of cannabinoids by 400%, making it substantially more cost-effective, and is uniquely absorbed by the user three-times faster than current methods.”
Although the TGA has not provided specific timing guidance, ECS said it expects the launch to occur in Q3 FY24, with production commencing post certification.
Meanwhile, the company said its RAP veterans’ brand is steadily growing, delivering an 86% increase in Q2 compared to Q1.
Schoerie added: “We continue to build on our strong start to the financial year, harnessing our strategic positioning as Australia’s lowest-cost medicinal cannabis cultivator and manufacturer. Our ability to utilise progressive and innovative cultivation methods to produce EU-GMP quality products produced another record sales quarter.
“The expansion of our cultivation areas and the incorporation of findings from our R&D project are crucial in meeting the increasing demand for ECS’ products and will allow us to substantially increase production.”
ECS took home three trophies at the Cannabiz Awards 2024, including one for Schoerie who was named Business Leader of the Year.