Hempco Reports Q2 2019 Results 104% Revenue Growth
Hempco to be Fully Acquired by Aurora Cannabis
TSX-V: HEMP
VANCOUVER, April 24, 2019 /CNW/ - Hempco Food and Fiber Inc. (TSX.V: HEMP) ("Hempco" or the "Company") is pleased to announce Q2 2019 results for the period ending February 28, 2019.
Q2 2019 and Subsequent Operational and Strategic Highlights
- Acquisition by Aurora Cannabis Inc. ("Aurora") (NYSE: ACB) (TSX: ACB) (Frankfurt: 21P; WKN: A1C4WM) Acquisition: On April 16, 2019, Aurora Cannabis Inc. (Aurora) and Hempco announced the companies had entered into a binding letter agreement (the "Letter Agreement") for Aurora to acquire all of the remaining issued and outstanding common shares of Hempco ("Hempco Shares") not already owned. In consideration of the transaction, Aurora has agreed to pay C$1.04 per Hempco Share, payable in common shares of Aurora, reflecting a valuation of approximately C$63.4 million on a fully diluted basis. The full release is available under the Company's SEDAR profile at www.sedar.com. Hempco's board of directors has recommended Hempco shareholders vote in favour of the transaction as they believe that full integration of Hempco with Aurora's global hemp assets will enable accelerated growth, generating additional shareholder value.
- Revenues: 104% year over year revenue growth to $0.6 million from $0.3 million for Q2 2018 was driven by execution of the Company's five prong strategy with focus on tri-crop utilization.
- Nisku facility: Hempco is in the process of commissioning production at its new, state-of-the-art Nisku facility, a 56,000 square foot, 2.9 million kg-per-year hemp processing facility. Nisku will be GFSI (Global Food Safety Initiative) Certified when it comes fully online. In anticipation of production coming online, the Company has managed to secure a first LOI for the processing of 300 tonnes of hurd.
- Diversification: The Company's commitment to innovation continued strong this quarter with the introduction of its new organic protein smoothie product line extension for its PLANET HEMP SUPERFOOD™ brand. As well, the Retail Council of Canada voted PLANET HEMP SUPERFOODS™ Super-Seeds a finalist for the 2019 Canadian Grand Prix New Products Award.
- Sales Channel Development: execution of the Company's commercial strategy saw continued traction with the development of new global sales channels, that include:
- Two new distributors in Ontario and Quebec for the PLANET HEMP SUPERFOOD™ brand
- Expansion of its national distribution network subsequent to the quarter through agreements for the grocery, and health and wellness segments in Western Canada and Quebec;
- Securing Metro Quebec and QF Foods listings for PLANET HEMP SUPERFOOD™;
- PRAISE HEMP™'s market penetration to over 300 retail store locations across Canada;
- A significant first order shipment to a large importer in New Zealand;
- The launch of its new PLANET HEMP SUPERFOOD™ e-commerce site at www.planethemp.ca;
- Continued development of international brand recognition of its PLANET HEMP SUPERFOOD™ and PRAISE HEMP™ brands, resulting in 84% revenue growth in the U.S. and 99% growth in Canada.
Management Commentary
"This is an exciting time for Hempco with the prospect of becoming the latest addition to Aurora's global network of hemp assets, intended to serve both the rapidly growing industrial hemp market and be an important part of Aurora's global CBD-from-hemp infrastructure. As part of the Aurora group of companies, Hempco gains invaluable access to Aurora's expanding infrastructure – its industry-leading science; global distribution channels, and innovation capabilities," said Diane Jang, CEO. "We believe that full integration into Aurora will enable accelerated growth for Hempco and generate additional shareholder value. As we execute on our strategy, leveraging Aurora's assets and capabilities will assist the production ramp up at our Nisku facility and accelerate product development, allowing us to advance our vision to be the leading Tri-Crop hemp company."
Financial Review
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 February 28, 2019, increased 104% to $0.6 million, as compared to $0.3 million for the three-month period ended February 28, 2018, driven by growth of the Company's PLANET HEMP SUPERFOOD™ and PRAISE HEMP™ brands across a growing network of domestic and international sales channels.
- Net loss for the quarter increased by $0.7 million to $1.6 million, driven by investments in organizational infrastructure to drive and carry growth, as well as increased market development.
- The cost of sales for the three-month period ended February 28, 2019 was $0.6 million, resulting in a gross profit of $0.01 million, an improvement of $0.1 million. While inventory write downs affected gross margins in the period, margins are expected to increase as sales continue to gain momentum and as the higher margin PLANET HEMP SUPERFOOD™ and PRAISE HEMP™ sales start making a larger contribution to overall sales.
Outlook
Management sees continued positive momentum for Hempco as reflected by its strong 104% year-over-year growth in Q2 revenues. Going forward, the Company will continue to execute on its Five-Prong Strategy, announced in Q1 to advance its Tri-Crop Strategy, grow existing and expand into new markets, as well as develop new product innovations. This solid foundation has positioned the Company for future growth, recently recognized by a joint Letter Agreement between Aurora and Hempco announcing Aurora's intention to acquire all the remaining issued and outstanding common shares not already owned by Aurora.
Aurora and Hempco expect to execute a Definitive Agreement on, or before, May 15, 2019. The proposed acquisition will require shareholder approval from two-thirds of the votes cast by the minority shareholders (non-Aurora shareholders) of Hempco Shares at a Special Meeting of Shareholders, to be held at a future date, to consider the proposed Transaction. In addition to shareholder approval, the proposed Transaction will be subject to applicable regulatory and court approvals and the satisfaction of other customary conditions. Upon completion of the Transaction, Hempco will become a wholly owned subsidiary of Aurora and Hempco's shares will be de-listed from the TSX Venture Exchange.
Hempco's Board of Directors recommend their shareholders vote in favour of the Transaction. (Full details of the Transaction are available in the release under the Company's SEDAR profile at www.sedar.com.
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 SUPERFOOD™ and PRAISE HEMP™, 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.
John Ross, Chief Financial Officer, +1.647.291.4234, [email protected]; Darlene Webb, Investor Relations, +1.647.992.3806, [email protected]
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