ECS Botanics delivered its strongest sales performance to date in Q2 FY24, posting revenue of A$7.3 million — a 78% jump from Q1 and 64% higher than the same period the previous year.
The ASX-listed company attributed the revenue increase to stronger oil and flower sales from existing customers, along with the addition of two new ones.
Customer cash receipts climbed 62% from Q1 to $6.5m, pushing the company to another quarter of positive net operating cashflow. That came even as ECS made a substantial investment in establishing and planting 25,000sqm of new outdoor fields — including irrigation infrastructure — a move that expands cultivation capacity by 60%.
The company closed out the calendar year holding a cash balance of $2.6m, with a $2m NAB credit facility remaining untouched.
An R&D project conducted within one of its Protective Cropping Enclosures (PCEs) has wrapped up, with positive findings on the ideal lighting and heating conditions needed to support consistent, year-round cannabis flower cultivation.
Run between July and October, the trial examined how heating affects yield and potency during cooler months, methods to boost yield and maintain batch consistency, and the role of sensors, lighting, and climate-control equipment in regulating temperature and humidity.
ECS said: "Some of the techniques that provided positive results have already been implemented to ongoing PCE operations which will deliver a significant increase in yield and hence revenue growth from existing assets."
The project also generated seven new cultivars, which entered their first commercial production run in December in response to customer demand.
Off the back of the trial, ECS has committed further funding to lighting and heating upgrades across four PCEs, which will be brought into a year-round growing cycle.
"We anticipate a 100% increase in production from these PCEs," the firm added.
ECS noted that several customers saw strong sales growth during the quarter, which in turn drove requests for additional supply.
New Zealand-based Nubu lifted its volumes by 50% quarter-on-quarter, while Medicann Health — with which ECS signed a $24m binding offtake agreement in October 2023 — maintained "solid growth in demand over the quarter, in accordance with our expectations".
Beyond its white-label customers, ECS said it is also supplying bulk flower to two other Australian cultivators to help meet their demand.
A trial shipment of flower was sent to existing customer Ilios Santé in Germany during the quarter.
On the subject of its own brand strategy, ECS pointed to "administrative delays" in the TGA issuing a Good Manufacturing Practice (GMP) certificate to Geocann — the US-based manufacturer of VESIsorb — as the reason behind the delayed rollout of its Avani Rapid CBD capsules.
In June 2023, ECS entered a 10-year licence agreement with Geocann to use the VESIsorb technology — a deal that managing director Nan-Maree Schoerie said would position the company as a technology leader in pharmaceutical-grade medicinal cannabis oils.
She said at the time: "VESIsorb increases the bioavailability of cannabinoids by 400%, making it substantially more cost-effective, and is uniquely absorbed by the user three-times faster than current methods."
While the TGA has not indicated a specific timeframe, ECS said it expects the product launch to take place in Q3 FY24, with manufacturing beginning once certification is granted.
The company's RAP veterans' brand continued to gain ground, with Q2 sales up 86% compared to Q1.
Schoerie added: "We continue to build on our strong start to the financial year, harnessing our strategic positioning as Australia's lowest-cost medicinal cannabis cultivator and manufacturer. Our ability to utilise progressive and innovative cultivation methods to produce EU-GMP quality products produced another record sales quarter.
"The expansion of our cultivation areas and the incorporation of findings from our R&D project are crucial in meeting the increasing demand for ECS' products and will allow us to substantially increase production."
ECS collected three awards at the Cannabis industry awards ceremony in 2024, among them a Business Leader of the Year honour for Schoerie.