COVID-19 Kills Hemp Foods Australia Sale

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Elixinol Global and Hemp Foods Australia

Elixinol Global (ASX:EXL) will continue to operate Hemp Foods Australia after the sale of the company to a Chinese buyer fell through.

Back in February we reported Elixinol Global was to sell its Australian hemp foods subsidiary Hemp Foods Australia Pty Ltd (HFA) to a subsidiary of China’s Shanghai Shunho New Materials Technology Co., Ltd. Elixinol said it wanted to sell the company so it could focus on the hemp-derived CBD market.

But Elixinol announced on Monday the sale wouldn’t be proceeding – and COVID-19 was to blame.

“On 25 May 2020, Shunho terminated the SPA due to non-satisfaction of a condition precedent in the SPA, citing COVID-19 impacts,” said Elixinol.

The firm will now continue to operate Hemp Foods Australia pending an evaluation of all opportunities to capitalise on what it says is HFA’s strong position.

“The Essential Hemp and Grounded food brands under HFA enjoy strong brand recognition and are in wide distribution across grocery, specialist retail and online,” said Group CEO Oliver Horn. “HFA’s hemp based and cruelty free Sativa skincare range also offers opportunities to meet consumers growing need for more natural personal care products.”

HFA products are manufactured, blended and packed in a factory located in Australia from both imported and local hemp seeds, and the venture is an Australian Certified Organic (ACO) company. The factory is located in Bangalow NSW, around 15 minutes from Byron Bay. HFA claims to be one of the largest hemp food wholesalers, retailers, manufacturers and exporters in the Southern Hemisphere. The company says it has been able to continue fulfilling online, distributor and bulk orders as usual during the COVID-19 pandemic.

According to Elixinol, in Q1 FY2020 Hemp Foods Australia  generated revenue of $1.3m and an EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $0.2m (unaudited). Total revenue for Elixinol Global in Q1 FY2020 was $3.3 million, a 25% decline on Q4 FY2019.

It wasn’t mentioned if the sale of HFA being terminated had any impact on an agreement to sign an exclusive licence to Shunho in relation to the manufacturing and distribution of Elixinol branded hemp derived CBD products in China, Taiwan, Hong Kong and Macau, which also announced in February.