Elixinol Global (ASX:EXL) trading update, positives in all regions

Interviews

by Katrina Bullock

Elixinol Global Limited (ASX:EXL) CEO Oliver Horn provides an updates on trading conditions across the company's key markets, its new distribution agreement in the UK with the Well Pharmacy Group, and early success with its CBD (cannabidiol) skincare range.

Katrina Bullock: Hello. Katrina Bullock for the Finance News Network and joining me from Elixinol Global (ASX:EXL) is CEO Oliver Horn. Oliver, welcome back to the network.

Oliver Horn: Hi Katrina. Thanks for having me.

Katrina Bullock: Pleasure. Now let's start with your recent update on trading conditions. How is the company performing?

Oliver Horn: Look, over the course of the year we've been working relentlessly to reposition our business towards a consumer products model and really building a strong nutraceutical CBD brand under Elixinol. And we launched our brand only six months ago and we're now very pleased to update the market that our strategy to build a global CBD powerhouse brand is working and we're expecting 10 to 15% quarter on quarter revenue growth and with all of our regions reporting growth for the quarter. So being a global leader in hemp derived CBD nutraceuticals with operations in US, Europe and Australia, we can say that we've successfully navigated the very challenging corporate environment and we're especially proud of this outlook and this performance with materially improved cost base, which is now almost 45% lower than in 2019. So all in all, we think this is a really strong outlook for the quarter.

Katrina Bullock: Thanks Oliver. Now you've mentioned the regions, just zooming in on them, can you tell us a little bit more starting with the US?

Oliver Horn: Yes, US is our biggest region really and the US CBD market has been challenging even prior to COVID, but through the investment into our new brand launch, our e-commerce capability and under new leadership of a new, very experienced CEO, we're now expecting a moderate, but robust growth from US this quarter. But we're very proud to have achieved this improved performance on a much leaner cost base and with an optimized business model that focuses solely now on consumer channels as we start divesting ourselves of low value B2B services, like private label or bulk sales and we further optimize our cost base. We've taken COVID as an opportunity to do that, towards a capital light model, which gives us really a cost advantage over in-house manufacturing. So we must hold our in-house manufacturing for the time being, while the economics are in favor of an outsource model. So overall I believe that the US is now in the best possible position to enter this crucial Christmas period and Black Friday coming up and Thanksgiving sales and hopefully continue its growth trajectory now.

Katrina Bullock: And how about your operations in Europe? How are they progressing?

Oliver Horn: Look, Europe has been for us a new beachhead and we've been in Europe for the last two years and we've truly built a first mover advantage and we're reaping the rewards of that right now. As a global brand and publicly listed company, we've become really the go-to choice for many customers and have secured wide ranging distribution across the UK and Ireland. In the UK we are now available in Well Pharmacy, the UK's third biggest pharmacy chain. And there we have a full range of eight products, including three custom developed water soluble tinctures and distributed in over 500 stores, so it's a massive achievement.

In addition to that, we've launched our Elixinol skincare range. So it's a first to market in Europe, into Boots in Ireland in 74 of the biggest of the 87 stores. And this new range consists of eight new products, which is a breakthrough for us as it will entirely open newer growth channels, a new consumer base that we can market through. And we are launching a good Christmas campaign, integrated campaign with substantial investment, including radio, print, digital and TV. So all of those new listings are in addition to our already existing strong business there, which has a big home TV shopping channel contribution into UK and Germany. And so we're building, a very robust business there and we're looking forward to Europe being our second growth engine as we globalize our brand.

Katrina Bullock: And what about your operations in Australia, including Hemp Foods Australia? How are they going?

Oliver Horn: Yes, look, Hemp Foods Australia, back into the fold, was up for sale and we maintained it though in the business, which I'm really, really grateful for. And it's been performing well in the first half of the year. Already it's up 20% with improving profitability and we've actually seen an uplift during the COVID months as consumers make very healthy choices whilst eating at home. And we certainly benefited from that, just reassuring ourselves that vegan and plant-based superfoods, high quality foods like we provide are bang on trend. On top of that, our essential hemp brand is one of the leading hemp food brands. And it's top ranging in Google search when you type in hemp foods and we are enjoying really wide distribution across national and independent grocers and health food stores. So not only do we have a strong asset here as a brand for Hemp Foods Australia and hemp foods, but we are also using it to build our CBD distribution into Australia and we're currently developing CBD products for the launch under the TGA special access scheme. So really exciting times for us in Australia as well.

Katrina Bullock: And a more general question about the continual rise we're seeing in e-commerce, you made the decision to upgrade your platform and focus on selling branded product. How is that performing and what are your expectations for online sales?

Oliver Horn: Yes. Look, we are now completely a different business than just six months ago. We are really focusing on consumer channels and consumer branded goods under Elixinol, building consumer brands and fast e-commerce is where the game is really at, particularly in COVID. But thankfully we invested in a good Magento platform earlier in the year. We rolled it out to all of our regions, so it's in Europe, it's in UK, it's in the US and that's now being optimized, constantly refined to give a really seamless consumer experience.

We've invested heavily in global talent. We recruited for a global head of e-commerce sitting in Europe, two new e-commerce and digital marketing leads in the US, so really investing into top talent from the industry and my expectation really for the business is that we're taking e-commerce from what is currently a 30% contribution to our revenues to read half of our revenues should be coming from e-commerce and we're working feverishly to do that. And now what we are all preparing for is the all important Black Friday sales, which is a very competitive environment, but we feel that we've got what it takes to deliver our successes there.

Katrina Bullock: And last question Oliver, before we let you go, any final words for investors?

Oliver Horn: Look, I mean, first of all, I think health and wellbeing, is very topical in the times that we're living in. So we believe that we can make a difference to people's lives and we are well positioned to service people's growing consumer needs and health needs. We made fantastic strides in repositioning the business and building a global CBD nutraceutical business around. So we're doing that with a fresh new brand that was only launched six months ago, on a much lower cost base and with a much slicker business, leaner business model and very much improved new team capability.

So we are in the best possible position and what we're really focusing now on is restoring some of the shareholder value that we lost throughout the last 12, 18 months. And as you can see, the hard work is paying off. We're starting to show robust results and I think that makes hopefully for some reassurance and rewarding reading and listening and hearing from our shareholders. So I believe now we are in the best possible position to get into the all important Christmas period and we are going to be publishing our quarterly results towards the October time. And obviously we keep the market updated as more good news emerges.

Katrina Bullock: Oliver Horn, thank you so much for your time today and for providing the update.

Oliver Horn: Katrina, it's been a pleasure once again. Thank you very much.


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