CBD Usage Rising in Japan Despite Drug Taboo
Japan may be known for its zero-tolerance cannabis laws and strong social stigma against the drug, but the sentiment towards CBD is quickly changing. CBD extracted from the seeds or adult stems of the plant is legal and is currently sold in vapes, drinks, and sweets at specialty cafes, health food stores, and even a shop in Tokyo’s main airport. Japanese Ministry of Health, Labour, and Welfare is considering approving medical marijuana to treat conditions like severe epilepsy.
According to a recent industry report, the Japanese CBD market is expected to become Asia’s second-largest CBD market, reaching around US$2.13 billion by 2024. The increasing demand for CBD in Japan opens up opportunities for companies in the hemp and cannabis industry including Flora Growth Corp. (NASDAQ:FLGC), Sundial Growers Inc. (NASDAQ:SNDL), Tilray Brands, Inc (TSX:TLRY) (NASDAQ:TLRY), Aurora Cannabis (NASDAQ:ACB) (TSX:ACB) and HEXO Corp. (TSX:HEXO) (NASDAQ:HEXO).
Flora Growth Corp. (NASDAQ:FLGC) is a leading all-outdoor cultivator, manufacturer and distributor of cannabis products and brands who operates one of the largest outdoor cannabis cultivation facilities.
On August 15, Flora Growth reported its financial and operating results for the six months ended June 30, 2022. The company reported $14.9 million in revenue for the first half of 2022, a rise of 604% compared to H1 2021 and 117% from H2 2021. Meanwhile, gross profit increased to $7.0 million, an increase of 547% compared to H1 2021 and 363% compared to H2 2021. Flora attributed the growth to its House of Brands, the launch of numerous new brands in the US, and the commencement of sales in its Commercial Wholesale and Life Sciences business.
Some of the H1 2022 highlights from Flora Growth include the acquisition of JustCBD, signing a distribution agreement with Giant OTG Management to provide access to JustCBD products at US airports, increasing its European presence with the opening of a London office, receiving approval to sell JustCBD products on Amazon UK, establishing a brick-and-mortar JustCBD store in the Czech Republic with plans to launch more stores in Germany through its partnership with Greenyard, and acquiring the CBD brand Masaya to expand its Life Sciences business offerings. Flora also completed build out of its all-outdoor cultivation and on-site extraction facility producing distillates and isolates using flower grown at its outdoor operation in Bucaramanga, Colombia.
“We started 2022 with the integration of both Vessel and JustCBD, and despite macro headwinds in the global markets as well as global cannabis regulations, we are extremely pleased with our growth year-to-date. We are also seeing positive movement in our Life Sciences division with progress on the approval of our clinical trials in the United Kingdom and the acquisition of Masaya, a science-backed, high-potency CBD brand,” said Luis Merchan, Chairman and CEO of Flora Growth. “We continue to prudently manage our overhead and working capital as we expect to improve profitability going forward. With all three of our core pillars generating revenue in the second half of 2022, continued gross margin expansion and a focus on streamlining operating expenses – we believe we have a path to profitability that few global cannabis companies can achieve in this difficult environment. The execution of our key initiatives is a testament to our team’s ability to deliver on plan.”
The company also reaffirmed that it expects 2022 revenue guidance to range between $35.0 million – $45.0 million, meaning a projected growth of approximately 300% – 400% compared to 2021.
Earlier this month, Flora Growth announced that it has signed a joint venture (JV) agreement with the largest indigenous tribe in Colombia, Pharma Indigena Misak Manasr Sas (Manasr). The pair will be focusing on the development of cultivation best practices, manufacturing, export and marketing of cannabis and cannabis-containing products.
Through the JV, Flora Growth will provide Manasr with technical and business support related to product development and distribution, regulatory advice, promotion of products that will be marketed under the Flora brand portfolio, as well as cannabis derivatives to complete product production. At the same time, Manasr will be working closely with the company to develop cannabis-based pharmaceuticals and products and assist with the approvals and authorizations required for exports of cannabis from Colombia.
The initial term of the JV agreement between Flora Growth and Manasr is three years, but the pair intend to create a lasting and mutually beneficial relationship for the foreseeable future.
For more information about Flora Growth Corp. (NASDAQ:FLGC), click here.
Cannabis Companies Report Financial Results and Expand Product Lines
With cannabis and CBD usage increasing around the globe, cannabis companies are working to increase their stake in the market by bolstering their teams, signing new agreements and expanding their production capabilities.
On July 25, Sundial Growers Inc. (NASDAQ:SNDL) announced that all resolutions put to shareholders at the reconvened annual and special meeting were passed. At the meeting, shareholders approved: setting the number of directors at five; electing Greg Mills, Zach George, Lori Ell, Bryan Pinney, and Gregory Turnbull as directors for the upcoming year; and appointing Marcum LLP as the company’s auditors for the upcoming year and authorizing the board of directors to set their remuneration. On June 20, Sundial entered into a bid agreement to acquire Zenabis Global Inc.’s assets. The assets covered by the bidding agreement include the 380,000 square foot indoor cultivation facility located in Atholville, New Brunswick, with an annual production capacity of approximately 46,000 kg of dried cannabis and a capacity of extraction of 15,000 kg. The offer agreement also provides for the acquisition of a 255,000 square foot disused indoor facility in Stellarton, Nova Scotia, which has been used as a packaging, processing and manufacturing facility for value-added cannabis.
Tilray Brands, Inc (TSX:TLRY) (NASDAQ:TLRY) announced on August 3 that Fresh Hemp Foods, Ltd., a part of the company’s Tilray Wellness division, struck a distribution arrangement with Southern Glazer’s Wine & Spirits, a premier wine and liquor distributor. Tilray Wellness will have direct access to Southern Glazer’s distribution network, which reaches bars, restaurants, grocery stores, and convenience stores. For fiscal 2022, Tilray‘s net revenue grew 22% to $628 million, or 29% in constant currency. Q4 2022 net revenue grew 8% to $153 million, and 14% to $163 million in constant currency. The company expects $70–$80 million in adjusted EBITDA and positive free cash flow in its operating business units in fiscal 2023.
Aurora Cannabis (NASDAQ:ACB) (TSX:ACB) recently repurchased an aggregate amount of approximately C$25.3 million (US$20 million) of its convertible senior notes at a total cost, including accrued interest, of C$24.3 million (US$19.2 million) in cash. The purpose of the transaction was to reduce the company’s debt and annual cash interest expense. Annual cash interest savings from note redemptions from Q3 2022 now total C$9.5 million (US$7.5 million). Aurora announced in May that it has been granted EU-GMP certification for its state-of-the-art medical cannabis production facility located in Germany. As the world’s leading manufacturer of medical cannabis, obtaining EU-GMP certification for the company’s first German manufacturing site marks an important milestone in completing a tender awarded by the German Federal Institute of medicines and medical devices.
On July 12, HEXO Corp. (TSX:HEXO) (NASDAQ:HEXO) announced that the company has finalized its previously announced transaction with Tilray Brands, Inc. The agreements with Tilray Brands consolidate HEXO and Tilray Brands’ strategic alliance and give HEXO a recapitalized balance sheet and financial flexibility to become cash flow positive within four quarters. On July 27, HEXO got an extension of 180 calendar days from Nasdaq Stock Market LLC to restore compliance with Nasdaq’s minimum $1.00 bid price requirement. The company now has until January 23, 2023, to meet the bid price requirement.
Flora Growth relies on natural and cost-effective cultivation practices to supply cannabis derivatives to its various business divisions of cosmetics, hemp and food and beverages.
FN Media Group, LLC
CBD Usage Rising in Japan Despite Drug Taboo
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