ECS Botanics has confirmed it is in advanced talks with European customers over servicing the recreational market in Germany when the government finally fulfils its pledge to make personal use legal.
Reporting third-quarter revenue of A$2.05 million, 86% of which was generated from its medicinal cannabis division, ECS said it expects the UK and Europe to become significant markets during 2022 and into 2023.
Shares climbed 3.7% to close last night at $0.028c, giving the firm a market capitalisation of just under $30m.
ECS said it was “heartened” by regulatory developments in Europe which have seen Malta and Luxembourg decriminalise cannabis and the key market of Germany signalling its intention to follow suit.
“It is expected Germany will dispense adult-use cannabis through pharmacies and meet the same quality standards as medicinal cannabis, which will be advantageous for the ECS business model and Australian cannabis companies who manufacture to EU GMP standards,” the company said. “ECS is currently in advanced discussions with European clients regarding servicing this opportunity.”
Based on the populations of each country, ECS predicted the German recreational cannabis market will be twice that of Canada.
But quite when Germany’s coalition government will follow through on its promise to legalise recreational use is unclear. Despite vowing to introduce “controlled distribution of cannabis” five months ago, no law has been passed, with the government accused of dragging its feet.
Federal commissioner for drugs and addiction, Burkhard Blienert, said it would be counter productive to rush through legislation, arguing several ministries need to be consulted in shaping the new law.
But the delay has frustrated critics who insist the Green Party — now part of the coalition government — has already drawn up appropriate legislation that simply needs to be signed off.
Meanwhile, ECS said it expects to obtain registration to export oils to Germany in the current quarter, with managing director Alex Keach describing demand for its dry flower products and medicinal oils as “very encouraging”.
ECS had cash reserves of $4.7m as at March 31 while net cash used in activities decreased 12% on the previous quarter.
“[It leaves] the company well placed to execute on a number of growth objectives in the coming months,” ECS said.