ECS Botanics delivered record quarterly revenue and cash receipts in Q2 FY24. Revenue totaled $7.3 million, a 78% increase from the prior quarter ($4.1 million) and a 64% increase on PCP ($4.5 million). The growth in revenue was driven by increased sales of both oils and flower from existing customers, along with the addition of two new key customers to ECS' client base.
Cash receipts from customers were $6.5 million, up 62% compared to the previous quarter ($4.0 million) and up 70% on PCP (Q2 FY23: $3.9 million). This drove another quarter of positive net operating
cash flow, despite the significant investment in the establishment and planting of 25,000m 2 (60% increase) of additional outdoor fields, including irrigation infrastructure.
ECS remains well funded with a cash balance of $2.6 million as at 31 December 2023, along with a NAB facility of $2 million which remains undrawn. ECS secured an equipment financing facility with NAB for
$0.5 million, of which $0.3 million was utilized to fund the heating and lighting project.
Expanded growing area
During the quarter, ECS invested in expanding its outdoor cultivation area by 60% to incorporate new fields and a dedicated section for CBD biomass. Plant spacing was also increased to facilitate mechanical foliar spraying and improve productivity. These improvements are expected to significantly increase annual production capacity and further reduce operating costs.
R&D project yields positive results
The R&D project in one of the Protective Cropping Enclosures (PCE's) 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. 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. This will further support Customer demands for exclusive cultivars.
As a result of the trial, ECS has confirmed additional funding into lighting and heating for four PCE's, which will be incorporated into a year-round grow cycle. ECS anticipates a 100% increase in production from these PCE's.
Strong demand from customers
During the quarter, several ECS customers experienced significant sales growth and subsequently required additional supply from ECS. For example, New Zealand-based Nubu increased volumes by 50%
compared to prior quarter.
In October 2023, as outlined in the Q1 FY24 activities statement, ECS signed a $24 million binding off- take agreement with Medicann Heath Pty Ltd, taking effect from January 2024. Medicann maintained solid growth in demand over the quarter, in accordance with ECS' expectations.
In addition to ECS' white-label customers, the Company is also producing bulk flowers for two other Australian cultivators to supplement their demand.
During the quarter, a trial batch of flowers was sent to the current customer, Ilios Santé in Germany.
Outlook
Commenting on the outlook, ECS Managing Director, Nan-Maree Schoerie said: "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 utilize 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," Nan-Maree adds.
For more information:
ECS Botanics
[email protected]
ecs-botanics.com
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