After initially charging higher following the release of its half year results, the Elixinol Global Ltd (ASX: EXL) share price has tumbled lower in late morning trade.
At the time of writing the cannabis company's shares are down 4% to $2.33.
What happened in the first half?
In the first half of FY 2019, Elixinol Global posted revenue of $18.3 million. This was a 19% increase on the prior corresponding period and was driven by the continued strong sales of Elixinol branded products.
The company posted a loss before interest, tax, depreciation and amortisation of $11 million and a loss after tax of $9.8 million, compared to a profit of $0.8 million and $0.1 million, respectively, in the prior corresponding period.
However, this was down to the company increasing its operating expenses significantly in order to prepare for its expected future growth.
Marketing expenses increased to 21% of revenue during the half, compared to just 7% during the same period last year. Management advised that the increase was primarily to drive brand awareness, advertising, market research, new branding and new product development. Elixinol also went on a hiring spree and increased its full time equivalent employees to 134 from 59 a year earlier.
In addition to this, in anticipation of increasing consumer demand and regulatory driven catalysts, the company significantly increased its inventories and placed sizeable deposits for raw material supply contracts in the USA. This incurred operating cash outflows of $17.3 million during the half.
Despite this, the company finished the period with net cash of $47.9 million, which will be predominantly used to accelerate its US expansion and international growth.
Speaking of which, the company estimates that the U.S. CBD market size will grow to US$25 billion by 2025. Over in Europe and the UK, the CBD market is expected to grow from $318 million in 2018 to $1.7 billion in 2023. Finally, the APAC market opportunity is forecast to grow to US$5.8 billion by 2024. All three represent lucrative opportunities for the company and management remains optimistic on its prospects in each market.
