In late October 2022, the Loddon River in Victoria reached historic levels, flooding many of Victorian residents’ homes. Along with that, the floods also nearly engulfed the ECS Botanics Holdings (ASX: ECS) medicinal cannabis production and processing facility located there.
The floods affected everyday work at the ECS facility as significant road closures and flooding in the surrounding areas resulted in employees being unable to commute to work. Its supply chain logistics were affected, too. The ongoing expansion of the facility by way of construction of multiple new protected cropping enclosures has also been delayed.
Rising water levels had been concerning residents for some time, until the river reached its 100-year peak in October. The site had no history of prior flooding. To address the impact of the floods, ECS has invested in substantially increasing levee banks to protect the facility. To date, the levee banks have kept the facility dry, allowing operations to continue, and the cannabis plants to be maintained. Although further potential flooding in the region remains a risk, the levees are expected to continue to protect the facility.
As of now, ECS does not think that the floods are going to have a material impact on product revenues.
Managing Director, Nan-Maree Schoerie commented, “We are pleased to have been able to protect the facility from flooding and hope to continue to do so. However, our thoughts are with the community and the many families who have lost their homes during this widespread flood event. From a business perspective, it is extremely frustrating, as this has distracted us from our expansion as we continue to experience very healthy demand for our products.”
Be it because of climate change or changing infrastructure, Australia has been experiencing floods like it hasn’t in decades. In NSW, too, thousands have been fleeing flood-prone regions to protect themselves.
For ECS, however, these past few years have been nothing but advantageous. Since its legalisation in 2016, medical cannabis has been booming in the country, ushering in millions in revenue. In fact, ECS recently sold its Tasmanian business for $3 million. In July of this year, the Company exported its dried cannabis flower for the first time to New Zealand, and also this year, in August, the Office of Drug Control (ODC) approved ECS’s expansion request. In keeping with that, the Company is adding an additional 15 protective cropping enclosures and increasing the area approved for the cultivation of high THC Medicinal cannabis. The expansion has more than doubled the area approved for cultivation from 23,210m2 to 54,410m2.
The flood might have thrown a spanner in the works for ECS right now. However, with the many new opportunities on its cards, it should be able to bounce back soon enough. And hopefully, so will the residents.
Alinda is a Business Reporter for The Sentiment
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