Ecofibre has recorded a pre-tax loss of nearly A$25 million for the first half of the 2023 financial year, following impairment charges totalling $12.2 million across its Ananda Health and Hemp Black divisions.
The write-downs — $6.5 million for Ananda Health and $5.7 million for Hemp Black — come after the company chose to shut one production line within its Hemp Black operation and scale back CBD extraction at its US facility.
For the equivalent period in the prior year, the company's pre-tax loss stood at $9.6 million.
The impairment charges follow the conclusion of a strategic review, with Ecofibre planning to "refocus around a tighter set of activities that can generate positive cash flow in the near term and have significant growth potential over time."
As part of its cost-reduction efforts, the company has suspended dried flower purchases for its US-facing Ananda Health CBD business and reduced the scale of its seed planting program.
"Those businesses can draw down on existing crop inventories," Ecofibre said in its financial report.
Revenue over the six-month period rose 6% to $16.5 million, though operating expenses increased 11% to $20.4 million, driven by higher staffing costs and greater investment in research and development.
The Australia-based Ananda Food division saw revenue decline 7% to $1.9 million. Record planting seed sales of $1 million were not enough to offset a drop in food product revenues, particularly through Woolworths.
Ananda Health, by contrast, posted a 3% revenue gain to $6.8 million, supported in part by a $400,000 lift in Australian CBD medicinal cannabis sales.
The company attributed its ongoing difficulties in the US to what it described as a "difficult" CBD market, one that is "forecast to decline over the next few years."
"Despite hemp-derived CBD being federally legal since December 2018, the FDA (US Food and Drug Administration) has not yet established these products as a dietary supplement or food," Ecofibre said. "Because of this lack of clarity, products containing hemp-derived CBD have limited access to mainstream retail distribution channels."
Excluding the impairment charge, pre-tax losses grew 41% to $12.6 million. Despite this, Ecofibre retains a solid cash position, with $12.7 million available as at December 31.
The company said it is continuing to evaluate a follow-up crossover trial for an over-the-counter CBD medicine after an initial study failed to deliver a positive result.
