Diversified industrial hemp company Ecofibre’s (ASX: EOF) speciality manufacturing division, Hemp Black, has locked in a three-year supply relationship with global athletic apparel company Under Armour. The arrangement will involve the supply of a specialty yarn for apparel use. At full production, the Company expects to generate $9 million in annual revenue.
The equipment commissioning is projected to be completed by early Q2 FY24. Additionally, Ecofibre plans to acquire specialty equipment from Under Armour, and within the next 12-18 months, it aims to obtain a second machine to meet requirements.
CEO Eric Wang said, “When Ecofibre announced our strategic review earlier this year, we advised that one of the key opportunities for Hemp Black would be to secure new performance yarn clients. The outstanding technical capabilities of the team enable us to work with tier-1 clients on large-scale opportunities.”
That’s not the only crucial partnership for Hemp Black. The division has come together with circular materials company Cruz Foam to produce an eco-friendly and biodegradable packaging material for Hemp Black’s customers. Hemp Black will be responsible for managing the entire production process of these products. The agreement also spans three years and will include manufacturing Cruz Cool, Cruz Chill, and Cruz Wrap. It is expected to bring in $3 million in annual revenue. The production line, provided by Cruz Foam, will be operational by early Q2 FY24.
Hemp Black President Jeff Bruner said, “We are excited to work with an innovative company like Cruz Foam, whose patented technologies will help revolutionise sustainable packaging in the United States. Both our businesses are committed to delivering sustainable product solutions for our customers, and we look forward to supporting Cruz Foam as its business expands.”
During H2 FY23, Hemp Black’s biomedical business showed strong performance. However, Intervascular, a key partner supplying surgical appliances, has informed Hemp Black that the volumes for H1 FY24 will be significantly lower. This decision comes as Intervascular plans to decrease inventory levels due to increased confidence in its supply chain. Nonetheless, regular production volumes and revenues are anticipated to resume in H2 FY24.
Hemp Black foresees a roughly 25% increase in revenue for H2 FY23 on H1 FY23. With the introduction of new contracts, the Company expects to achieve profitability in FY24 and aims to continue expanding in FY25 and beyond. Apart from revenue growth, Hemp Black remains committed to effectively managing its cash and investment requirements. It plans to utilise existing resources whenever feasible and explore options for financing or obtaining new equipment directly from customers.
Overall, in Q4 FY23, Ecofibre saw its revenue increase by 7% on Q4 FY22, reaching $7.8 million. However, it was down by 5% on Q3 FY23, as the Company credited $1.3 million to customers for damaged seed. Its divisions performed well, as Hemp Black delivered a record sales quarter, raking in $4.9 million in revenue, up from $3.4 million in Q4 FY22, and its hemp tech arm Ananda Health’s revenue shot up by 9% on pcp and up 45% on the prior quarter.
Wang noted, “June quarter revenues include record sales for Hemp Black, higher sales in Ananda Health, and lower sales in Ananda Food due to $1.3m in sales credits issued to fibre seed customers for goods damaged in transit from Australia to the US. We remain focused on returning the business to positive operating cash flows, supported by revenue growth initiatives.”
Ecofibre closed the quarter with cash equivalents of $7.3 million as of 30 June, in line with the prior quarter.
Alinda is a Business Reporter for The Sentiment
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