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Expansion, Supply Deals and US Entry Send Neptune Stock Higher

By June 13, 2019 No Comments

BHOLAVAL, QC, Neptune Wellness Solutions Inc. (NEPT), a Canadian nutraceutical business shifting to become a large cannabis oil extractor, today announced results for the quarter ending March 31, 2019, its first quarter with cannabis revenue.

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Revenue for the quarter dropped to CAD $5.7 million from $6.7 million for the previous quarter, due to the company’s changing focus. For the fiscal year, its total revenues of CAD $24.4 million were stable with previous year.

However, due to other recent promising news from the company, the stock rose 5% to $4.89. The stock is up 28% on the month, and 66% over 6 months.

Capacity expansion, supply deals, and US market entry

Neptune recently made several big announcements that have been driving its stock up.

It approved an $11 million investment to increase extraction capacity from 200,000 kg to 1,500,000 kg. This it claims now gives the company the largest extraction capacity in Canada.

It also signed a three-year deal with The Green Organic Dutchman for TGOD to supply it with a minimum of 230,000 kg of cannabis and hemp biomass. Neptune will extract oil from the hemp and package it for TGOD.

Neptune also signed a deal with Tilray to extract cannabinoids from cannabis and hemp biomass. Tilray committed to provide a minimum of 125,000 kg of biomass over a three-year period.

Finally, in more big news, Neptune announced it would enter the US hemp market by agreeing to buy SugarLeaf Labs, a U.S.-based hemp processor with an extraction capacity of 1,500,000 kg. This gives it total extraction capacity of 3 million kgs.

In total, these deals have quickly made Neptune a major player in the cannabis extraction market.

However, transitions take time and money. Net loss for the quarter was $12.4 million, down from $4.8 million versus the previous quarter. Net loss for the year was CAD $23.2 million, down from net income of $17 million in the previous year.

Jim Hamilton, CEO of Neptune had this to say, “Fiscal 2019 was a pivotal year for Neptune, with a recent supply contract and a U.S.-based acquisition. …We have more contracted demand in hand than our approved capacity can satisfy. The capacity amendments and security clearance applications we have submitted…will alleviate the constraints we are currently facing …

“The expansion plans…will increase our processing capability and broaden our service offering to transform Neptune into a one-stop shop for Licensed Cannabis Producers. We are also pursuing our EU GMP certification as well as our organic certification, both of which should unlock incremental markets and revenue opportunities.” Hamilton went on to say they are on track to achieve positive EBITDA this year. “With the largest extraction facility in Canada, a license, and a transaction pending for a second facility in the United States, multiple supply partnerships now in hand, and solid and growing relationships with new clients, we are on our way to realizing our objective to become the global leader in cannabis extraction.”

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Source Neptune press release

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