Hemp firm Elixinol saw revenues fall by 24 per cent in the second quarter but insisted it is well placed to take advantage of its recent repositioning.
The company reported normalised revenue of $3.4m, down 24% on the first quarter.
Elixinol said the impacts of Covid led to “challenging retail macro dynamics”. Shares fell five per cent to 0.175c.
But chief executive Oliver Horn told the market it has made “strong strategic progress” following its product relaunch in March and its exit from lower margin and private label businesses.
“The company’s focus remains on our higher margin, Elixinol branded products, and the response from customers in the US and Europe to our relaunched brand has been very pleasing,” Horn said. “Our e-commerce platform continues to be optimised and is now generating strong business intelligence to support our sales and marketing efforts.”
Reflecting the repositioning, the company said its own-branded, higher-margin product accounted for 65 per cent of revenue in the quarter, up from 53 per cent.
Horn flagged two other post-quarter developments; the retention of Hemp Foods Australia (HFA) in its portfolio, and an agreement with wholesaler PharmaCann that will see hemp-derived CBD products available for prescription under the Special Access Scheme.
The decision to keep HFA followed the collapse of a $500,000 deal in May after the Chinese buyer withdrew.
Elixinol said the “improving financial performance” convinced it to retain the division rather than search for another buyer.
Unaudited first half revenue for HFA hit $2m, compared to $1.6m in the corresponding period last year.
Losses narrowed from $0.8m to $0.3m.
Chairman Paul Benhaim said the potential down scheduling of CBD could open new opportunities for the brand.
“This decision provides us potential to leverage the cost base and skillset in the HFA business to support potential opportunities emerging in the Australian CBD landscape,” he said.
Elixinol had earlier abandoned its plan to pursue a medicinal cannabis licence and become a cultivator, manufacturer and producer of medicinal cannabis.
“As time passed we recognised that the return on investment was not in the best interest of shareholders,” Benhaim said.
“Five years ago there were no quality CBD farmers, manufacturing or processors, let alone innovators, so we became vertically integrated. There are now many more people who have jumped into the industry. This has led to an oversupply of raw material and associated price drops.”