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Stock of the day: Ecofibre share price jumps on profit guidance

The Ecofibre Ltd (ASX: EOF) share price is up 3.56% today after the company announced its FY20 profits are expected to double. FY20 net profit after tax is expected to be around $12.5 million, an increase of more than 100% on the FY19 result. 

What does Ecofibre do? 

Ecofibre is a provider of hemp products in Australia and the United States (US). In the US, Ecofibre’s Ananda Hemp and Ananda Professional brands produce nutraceutical products for human and pet consumption as well as topical creams and salves.

In Australia, the Ananda Food brand produces Australian grown and processed hemp food products including protein powders and hemp oil. Ecofibre’s Hemp Black business is focused on developing hemp-based textiles and composite materials in partnership with TexInnovate in the US. 

What did Ecofibre announce? 

Ecofibre released its quarterly report and provided an update on trading performance, including FY20 guidance. CEO Eric Wang said, “we expect our FY20 NPAT to be around $12.5 million, up more than 100% in our FY19 result. The result is underpinned by full year revenue in excess of $50 million and a business model that focuses on profitable growth in sales and EPS.” 

Ecofibre delivered a strong annual result, despite a challenging final quarter that included significant upheaval across the supply chain and customer base. The business has adjusted focus as required, with its Hemp Black business tapping into demand for PPE while the Ananda Food business continues to experience steady sales growth.

The Ananda Health business remains the number one supplier to retail pharmacies in the US by a wide margin, with the company reporting it has over 50% market share nationally. 

What’s next for Ecofibre? 

Ecofibre believes pharmacies are the preferred channel for long-term patients utilising CBD for health and beauty. It plans to gain access to more pharmacies and practitioners over time to expand market reach for the Ananda Health brand.

Hemp Black continues to invest in addressing market demand for PPE, launching a face mask late in FY20. Around 135,000 masks were sold in May and June resulting in $2.4 million in revenue. Manufacturing capacity will double this quarter to 130,000 masks per month with distribution of masks to Australia beginning this week. 

Ananda Food’s newly formulated protein powder is to be used by plant-based food producer The Alternative Meat Co in an upgraded range of products. The launch is planned for August with products to be available in Coles. Woolworths will begin stocking Ananda’s hemp seed oil in August under its Macro brand alongside its existing hemp seed and protein powder products. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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