Strong Growth due to Diligent Strategy
Execution
TSX-V: HEMP
VANCOUVER, Jan. 23, 2019 /CNW/ - Hempco Food and Fiber
Inc. (TSX.V: HEMP) ("Hempco®" or the "Company")
is pleased to announce Q1 2019 results for the period ending
November 30, 2018.
Q1 2019 and Subsequent Operational and Strategic
Highlights
- Revenues: In the first quarter of 2019 revenues gained
significant strength and achieved a 47% increase over the same
period in fiscal 2018 and a 175% sequential increase over the
previous quarter. Revenue growth was due to execution of the
Company's recently announced 5-Prong strategy, including entering
into new international markets (e.g New
Zealand), and the development of new distribution channels
(the Company added distributors in Ontario and Quebec). The successful execution of these
initiatives more than offset a fall in U.S. bulk sales,
attributable to transition of a major distributor due to new
ownership. While bulk sales continued to be the largest
contributor to revenue, at 76% of sales for the quarter, the
Company's premium consumer packaged goods ("CPG") brands, PLANET
HEMP™ for consumers and PRAISE for the animal food supplement
market, showed strong momentum and now account for 24% of revenues
in the quarter, up from the 21% for fiscal 2018.
- Capacity: The Company is progressing well with the
commissioning of its new 56,000 square foot, 2.88 million kg/year,
hemp-seed processing facility in Nisku, Alberta. The Company anticipates
further product diversification from its Nisku plant upon commissioning of its
industrial fiber processing line, expected for the current calendar
quarter. The Nisku facility
enables the production of bulk hemp products such as hemp seed
protein, hulled hemp seeds, animal hemp supplements, hurd and
fiber, and allows for further portfolio expansion of the Company's
higher margin CPG product lines under the Company's premium brands
PLANET HEMP™ and PRAISE.
- Diversification: As hemp fiber and hurd processing
capacity comes online in 2019, Hempco anticipates developing new
revenue streams. New products are being developed for both
its bulk hemp business and the company's premium CPG brands PLANET
HEMP™ and PRAISE. The Nisku
facility will extract fibers from the hemp "stalk" for sale in the
business-to-businesses market. Processing of fiber and hurd gives
Hempco the ability to achieve its sustainability vision for
whole-plant utilization, benefiting all stakeholders, including
customers, farmers and shareholders, as well as creating a positive
environmental impact. The historic passing of the U.S. 2018 Farm
Bill means hemp is no longer considered an illegal substance in the
U.S. As well, the FDA recently classified hulled hemp seeds,
hemp seed protein and hemp seed oil as 'Generally Recognized as
Safe' (GRAS) for human consumption. This means hemp products
not containing CBD can now legally be marketed in human foods
without seeking prior food-additive approval. Based on these
significant changes, Hempco anticipates market opportunities to
expand for all its product categories within the U.S.
- Sales Channel Development: Significant distribution
partners were established during the quarter in both Ontario and Quebec for PLANET HEMP Superfood™, as well, a
first order from a major New
Zealand importer was completed successfully. Hempco
participated in the Supply West Trade Show in Las Vegas to build awareness and pursue new
bulk customers. Hempco will continue to seek out new opportunities
to deepen its market penetration as it remains focused on the
execution of its 5-Prong Strategy.
- Aurora Cannabis Inc. (Aurora)
Partnership: Now holds 52% of the issued and outstanding
Hempco common shares. Aurora holds a $5 million debenture of which the principle
amount could be converted into 4.2 million Hempco shares.
Upon conversion, Aurora's ownership interest in Hempco would
increase to 55%.
Management Commentary
"We achieved a marked
improvement in our quarterly performance as compared to both the
previous quarter and the prior year's quarter, resulting directly
from the successful execution of our 5-Prong Strategy," said
Diane Jang, CEO. "Hempco has built a
solid foundation for expansion of its premium CPG product lines
PLANET HEMP™, and PRAISE. We see further opportunities to grow our
bulk hemp product segment by entering new growth markets. The
passing of the Farm Bill in the U.S. creates additional
opportunities for Hempco to accelerate development of our hemp
product lines in the U.S. Lastly, with our Nisku plant being commissioned and anticipated
to become fully operational shortly, we will be able to support the
major sales channels we have and new sales developments, both with
existing and new products."
Financial Review (C$000's; except per share
information)
A more detailed discussion of financial results
is provided in the Company's Management Discussion and Analysis,
filed on www.sedar.com
- Revenues for the quarter ended November
30, 2018, increased 47% to $768 compared to $524 reported in Q1 2018 and increased 175% over
the previous quarter. This increase is primarily related to
Hempco's successful entrance into new geographic markets and the
development of new sales channels.
- Net loss for the quarter ended November
30, 2018, increased by $798 to
$1,490 compared to $692 in Q1 2018, as the Company is investing in
developing its organization to carry the anticipated growth.
Increased sales resulted in an improvement of gross margins.
- The cost of sales for the quarter was $599, resulting in a gross profit of $169. Gross margins on product sold was 22% of
sales. Gross margins are expected to increase as sales continue to
gain momentum and as the higher margin brands, PLANET HEMP™ and
PRAISE, sales will make a larger contribution to overall sales.
PLANET HEMP ™ and PRAISE represented 24% of the sales in Q1 2019,
reflecting growth of the Company's retail and animal business
segments.
The Company anticipates that its investments in quality control on
raw materials and the commencement of operations at its new
Nisku facility will be accretive
resulting in a relative reduction in the costs of goods sold.
Outlook
Momentum from product line launches in the PLANET HEMP
Superfood™ and PRAISE lines, sales channel development through
distributor and new market expansion for bulk have started to show
positive momentum. The Company is focused on executing its 5-prong
strategy, which includes:
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1)
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Building new global
markets for Canadian bulk hemp products and PLANET HEMP™ and PRAISE
brands. Management anticipates further expansion in Canada,
New Zealand, UK, USA and into other geographical markets. The
completion of the new Nisku facility will further accelerate
revenue development, secure product sourcing, reduce costs and
improve quality issues experienced in 2018. With the Company's
multi-channel goals, its 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. 2019 will
see the launch of e-commerce on the Company's own re-branded
consumer websites.
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Concurrent with the
passing of the new U.S. Farm Bill, effective January 1, 2019,
the U.S. Food and Drug Administration (FDA) announced that
hulled hemp seeds, hemp seed protein and hemp seed oil are now
classified as Generally Recognized As Safe (GRAS) and can be
marketed legally in human foods without the need to seek prior food
additive approval. These historic changes create significant
opportunities for Hempco to pursue further market penetration in
the U.S., creating new pathways for innovation, and enabling the
development of new revenue streams.
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2)
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Focusing on
innovations to further expand hemp-based products into new consumer
categories and market segments. A robust product innovation
pipeline is being developed with new launches anticipated for both
the PLANET HEMP™, PRAISE, and Hempco product lines.
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3)
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Developing tri-crop
opportunities for hemp-based foods, fiber and nutraceuticals to
maximize revenue. The Company's new hemp fiber and hurd
processing capacity is expected to bring in new revenue streams for
the Company. The Nisku facility will extract fibers from the hemp
"stalk" for sale to business-to-businesses. The addition of fiber
and hurd product lines reflects the Company's vision of whole-plant
utilization, and will benefit all stakeholders, as well as benefit
the environment.
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One of the biggest
recent developments for the hemp market is the anticipated ability
under the new Cannabis Act, to start processing hemp for the
extraction of CBD oils. The Act became law in Canada on October 17,
2018. The Company estimates it will be able to source in excess of
5 million pounds of chafe, flowers and leaves 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.
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4)
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Championing Canadian
hemp as a healthy ingredient for food manufacturers through
marketing and other promotional activities, including key trade
shows, to increase visibility of Canadian hemp and the Company's
brands. The Company has increased its profile and exposure at trade
events generating interest from baked-goods manufacturers,
meat-substitute companies, and animal feed suppliers.
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5)
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Taking on an active
and essential leadership role with the Canadian Hemp Trade Alliance
(CHTA) to help drive the CHTA's objectives in promoting
Canadian-grown hemp and derivative products, while working closely
with the government on research, regulations, and international
trade efforts and missions. With Hempco's CEO being elected
to the CHTA's Board on November 19, 2018, she will chair the newly
formed, Market Development Committee. The committee's objective is
to market and grow market share of the Canadian Hemp industry
globally.
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Health Canada's
proposed changes to its upcoming Canada Food Guide to be released
later this year is evidence that plant-based protein is gaining
ground. The new Food Guide is proposing to reduce its legacy four
major food groups down to three: vegetables and fruit; whole
grains, and protein-rich foods, especially plant-based sources of
protein. This is a major development highlighting that the general
public are becoming more aware of the health benefits of
plant-based proteins.
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Additionally, the partnership with Aurora provides Hempco with a
highly visible partner. Leveraging of Aurora`s expanding
infrastructure and growing constellation of trusted partners,
management expects will contribute to the Company`s ability to
accelerate its commercial development into new markets and revenue
streams.
About Hempco
For more than 12 years Hempco has been a trusted and respected
pioneer, innovator and provider of quality hemp-based foods, hemp
fiber and hemp nutraceuticals. Hempco produces and markets the
brands PLANET HEMP ™ and PRAISE, hemp-based foods and
nutritional supplements for people and animals. Hempco is
expanding its processing ability to meet global demands in a 56,000
sq. ft. facility located at Nisku, Alberta. Hempco's
common shares trade on the TSX Venture Exchange under the symbol
"HEMP".
The TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
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.
Forward-looking statements in this press release include the
Company's anticipation of further growth. These statements are only
predictions and are not guarantees of future performance;
therefore, undue reliance should not be placed on them. Such
forward-looking statements necessarily involve known and unknown
risks and uncertainties, which may cause actual performance and
financial results in future periods to differ materially from any
projections of future performance or result expressed or implied by
such forward-looking statements. 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. The Companies
are 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.
On behalf of the Board of Directors,
HEMPCO FOOD AND FIBER INC.
Diane Jang
CEO
SOURCE Hempco Food and Fiber Inc.