After witnessing a cash burn of $368k in the previous quarter, Cannabis-based pharmaceutical company Althea Group (ASX: AGH) has entered cash flow positivity from its operating activities in Q1 FY24, resulting in a net cash inflow of $35,000. This achievement can be attributed to the Company’s successful cost-cutting initiatives, which have begun to yield results.
For the quarter ending on September 30, 2023, Althea Group reported customer receipts totalling $9.5 million, indicating a 46% increase compared to Q1 FY23. This impressive performance was primarily driven by Althea’s global cannabis-based medicines business, which contributed $4.9 million in receipts.
Althea’s recovery during this quarter can be seen in its rebound from stock shortages experienced during the first half of 2023. The outlook for the company is positive, with sales of dried flower products gaining momentum and continued growth in cannabis extracts, including oils and soft gel capsules.
AGH CEO Joshua Fegan said, “This is an important moment in time for AGH, achieving a cash flow positive result in our consolidated business. The current market demands small-cap companies reach this important milestone, and we are incredibly proud to achieve this result, being one of the only cannabis companies to be in cash flow-positive territory. The Board’s decision to reduce their compensation, along with our CFO and myself, is testament to our comprehension of the challenging capital market environment for up-and-coming businesses and their shareholders.”
AGH’s wholly-owned subsidiary, Peak Processing Solutions, reported customer receipts of $4.6 million for the reporting period. This accomplishment is particularly noteworthy given a temporary shutdown of the beverage production line in July 2023 to complete essential capital improvements at the facility. During the quarter, Peak invested $528,000 to finalise the installation of its tunnel pasteuriser. This strategic move positions Peak to serve existing and new beverage customers, including the Boston Beer Company.
The decision to interrupt Peak’s beverage production line for July 2023 allowed the integration of the tunnel pasteuriser to be completed, a step that was essential to elevate its production capabilities. The strategic investment of approximately $1.1 million, which is now complete, establishes Peak as the sole cannabis beverage manufacturer in Canada with both flash and tunnel process capabilities.
Looking forward, Althea intends to launch two additional soft gel capsule products in the upcoming December quarter, building on the success of the Althea CBD25 soft gel capsules, which demonstrated a notable 46% month-over-month growth from August to September. The Company will also introduce three exclusive dried flower products in the first quarter of 2024 to address an underserved product category.
As part of its cost-cutting programs, the Company’s non-executive directors have taken a 25% reduction in remuneration for the next six months, commencing October 2023. The Company’s CEO and CFO will also take a 10% reduction in salary for the next six months.
Althea remains fully funded, with $3.6 million cash on hand at the end of the quarter. It has completed its capital expenditure program and expects to report another positive cash flow result for the December 2023 quarter.
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