Positive momentum from new initiatives results in
doubling of quarterly revenues
TSX-V: HEMP
VANCOUVER, July 26, 2018 /CNW/ - Hempco Food and Fiber Inc.
("Hempco" of the "Company") (TSX-V: HEMP) today announced its
results for the third quarter fiscal 2018 period ended May 31, 2018.
Q3 2018 and Subsequent Operational and Strategic
Highlights
- Aurora Partnership: Aurora now holds 31,872,294 Hempco
shares, or 52.5% of the issued and outstanding Hempco common
shares, as at May 31, 2018. The
partnership positions Hempco exceptionally well to capitalize on
the opportunities for whole-plant utilization, including the
extraction of CBD, under the new Cannabis Act from October 17, 2018 onwards, among others through
Aurora`s strategic extraction partner Radient Technologies.
- Revenues: Q3 2018 revenues more than doubled as compared
to Q3 2017 due to the successful execution on the Company's growth
strategy related to the introduction of new products under the
PLANET HEMP and PRAISE brands and the development of new
distribution channels.
- Capacity: Construction of the Company's new processing
facility in Nisku, AB, is nearly
complete, Management anticipates the new facility to be operational
this summer, which will add 240,000 kg per month in capacity. The
added capacity and quality assurance programs and certifications
will enable Hempco to pursue additional revenue streams, as well as
target larger customers to drive revenue growth.
- Diversification: During the year, the Company launched a
number of new product lines, such as hemp supplements for the
equine and canine market. The Company anticipates these products to
become a material contributor to growth in 2018.
- Sales Channel Development: The Company continued its
initiatives to develop new sales channels for its retail product
line PLANET HEMP. Significant initiatives include:
-
- PLANET HEMP brand launched on Amazon.com and Well.ca,
- New listings of the PLANET HEMP CBD oil product line with the
largest natural foods distributor in the UK,
- Secured new listings at Kane Vet., Canada's largest and fastest growing
animal/pet supplier,
- New VP Sales started at the end of April; and
- Continued new product development for the PLANET HEMP and
PRAISE brands.
- Balance Sheet Strengthened: Working capital of
$6.2 million at May 31, 2018, providing liquidity for the
implementation of Hempco's strategic growth initiatives.
Management Commentary
"We are very encouraged by the early successes of our strategy
to expand our product offering, access new revenue streams and
develop additional distribution channels across the globe," said
Diane Jang, CEO. "The momentum we
are experiencing with our consumer packaged goods lines under the
PLANET HEMP and PRAISE brands, we believe, will continue to
strengthen throughout the year and contribute towards accelerated
revenue growth. The shift in product mix towards product offerings
with higher added value is starting to positively impact our margin
profile. Completion of our Nisku
facility, further diversification, differentiation, and channel
development, as well as the implementation of the New Cannabis Act,
we believe, positions Hempco well to deliver sustainable growth and
profitability."
Financial Review
A more detailed discussion of financial results is provided in
the Company's Management Discussion and Analysis, filed on
www.sedar.com
Net loss for the 3-month period ended May
31, 2018 came in at $1.0
million, a $0.2 million
increase related to organizational investments to support and
deliver growth going forward, as well as construction of the
Nisku facility.
Revenues
Revenues of $1.1 million for the
quarter ended May 31, 2018 increased
by $0.6 million compared to the
quarter ended May 31, 2017, due
mainly to growth of sales in the United
States and strong early growth across the Company's new
product lines PLANET HEMP and PRAISE.
Cost of Sales and Gross Profit
The cost of sales for the three-month period ended May 31, 2018 came in at $0.8 million, resulting in a gross profit of
$0.3 million. In comparison, cost of
sales for the same period in the prior year was $0.4 million with a gross profit of $0.1 million.
Expenses
Overall operating expenses increased to $1.3 million for the three-month period ended
May 31, 2018, as compared to
$0.9 million for the same quarter in
the prior year, related predominantly to staffing increases to
execute the Company's growth strategy and expenses related to the
completion of Hempco's new Nisku
processing facility. Non-cash stock-based compensation were
higher, reflecting grants to incoming officers and
directors.
Outlook
Hempco continued executing on its strategy to reposition the
Company in the three months ended May 31,
2018, by focusing on three key initiatives:
- Become a major supplier to the retail market of a
well-diversified portfolio of health-related products through its
premium brand PLANET HEMP, as well as to the animal feed supplement
market through its newly launched brand PRAISE
- Expand its bulk wholesale business through the development of a
new facility in Nisku,
Alberta
- Become a supplier of CBD-based raw material upon the
introduction of the new Cannabis Act, which received Royal Assent
in June 2018, with commencement of
adult consumer use sales on 17 October
2018.
The PLANET HEMP Consumer Packaged Goods (CPG) brand is growing
steadily in Canada since its
launch in fiscal 2017, with the product line currently carried by
over 70 retail stores. Further retail expansion and new product
innovations are expected in 2018. Expansion of distribution
channels, targeting natural/specialty food and grocery retailers,
is expected to deliver greater market penetration. Implementation
of the Company's CPG e-commerce strategy, commenced in 2018 with
product launches on Amazon.com and Well.ca, two of the most heavily
visited sales channels for natural health products, is anticipated
to be another revenue driver.
The Company continues to work on the completion of its new hemp
hurd processing capacity. Once operational, this facility
will extract fibers from the hemp "stalk" for sale into a ready
market. Hurd processing is anticipated to provide an
additional revenue stream for both the Company and the farmers
Hempco deals with.
One of the biggest recent developments for the hemp market is
the anticipated ability under the new Cannabis Actto start
processing hemp for the extraction of CBD oils. The Act was granted
Royal Assent in June 2018. The
Company will be able to source chafe for potential sale through its
farmer contacts, which would benefit the Company, as well as hemp
farmers and the Company`s partners, Aurora and Aurora`s extraction
partner Radient Technologies.
The strategic partnership with Aurora provides Hempco with
significantly increased visibility. Leveraging Aurora`s expanding
infrastructure and growing constellation of trusted partners,
management expects, will enable the Company to accelerate its
commercial development by entering into new markets and generating
new revenue streams.
The potential addition of hurd and chafe processing is part of
Hempco's strategic vision for whole plant utilization, which the
Company believes will benefit of consumers, farmers and
shareholders.
Overall, the Company is well positioned to capitalize on the
numerous opportunities present in the various bulk and consumer
packaged goods segments of the hemp market. Hempco is
well-capitalized to execute on its strategy, and management
anticipates that continued positive momentum in its various markets
will contribute towards accelerated revenue growth and positive
margin development.
About Hempco
For more than 12 years Hempco has been a trusted and respected
pioneer, innovator and provider of premier hemp seed foods. Hempco
is committed to developing hemp foods, hemp fiber and hemp
nutraceuticals, a "tri-crop" opportunity for a sustainable future.
Hempco is expanding its processing ability to meet global demands
in a 56,000sq. ft. facility located at Nisku, Alberta. Hempco's common shares
trade on the TSX Venture Exchange under the symbol "HEMP". Hempco®
has grown its business significantly and is generating value and
profits for shareholders.
On behalf of the Board of Directors
Diane Jang
Chief Executive Officer
+1.604.431.8787
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"). Forward-looking
statements are frequently characterized by words such as "plan",
"continue", "expect", "project", "intend", "believe", "anticipate",
"estimate", "may", "will", "potential", "proposed" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. These statements are only predictions.
Various assumptions were used in drawing the conclusions or making
the projections contained in the forward-looking statements
throughout this news release. Forward-looking statements are based
on the opinions and estimates of management at the date the
statements are made, and are subject to a variety of risks and
uncertainties and other factors that could cause actual events or
results to differ materially from those projected in the
forward-looking statements. Hempco is under no obligation, and
expressly disclaims any intention or obligation, to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as expressly
required by applicable law.
Neither TSX-V, nor its Regulation Services Provider (as that
term is defined in the policies of TSX Venture Exchange) accept
responsibility for the adequacy or accuracy of this
release.
SOURCE Hempco Food and Fiber Inc.
