The Elixinol Global Ltd (ASX: EXL) share price was a positive performer on Tuesday following the release of its second quarter update.
The shares of the manufacturer and global distributor of industrial hemp based dietary supplement and skincare products climbed over 4% at one stage before ending the day approximately 1% higher at $3.48.
What happened in the second quarter?
In the second quarter of FY 2019 Elixinol Global recorded group revenue of $9.9 million, which represented growth of 19% on the prior corresponding period and 18% quarter on quarter.
This brought its half year revenue to $18.3 million, up 19% on the first half of FY 2018.
Whilst the level of growth in the second quarter may be lower than normal, it is worth noting that this is due to a previously announced strategic decision to reduce its focus on the lower margin private label business in the United States to enable increased capacity for expected future growth of its higher margin branded products.
Excluding this private label business, normalised revenue growth for the second quarter of FY 2019 would have been 38% compared to the prior corresponding period and half year revenue would have increased 34% on the prior corresponding period.
Cash receipts for the quarter came in at $8.35 million, but due to a jump in product manufacturing and operating costs, the company posted a net cash outflow from operating activities of $19.3 million. This left Elixinol Global with a cash balance of $48.1 million.
The rise in product manufacturing and operating costs was due to the company significantly increasing its inventories and placing sizeable deposits for raw material supply contracts in the USA in anticipation of increasing consumer demand and regulatory driven catalysts.
All in all, management believes that investing in key areas of the business like this will allow it to pursue its strategy and focus on increasing its distribution of branded products to grow revenues and capture market share.
Elsewhere in the cannabis industry on Tuesday, the Auscann Group Holdings Ltd (ASX: AC8) share price raced 4% higher and the Althea Group Holdings Ltd (ASX: AGH) share price dropped 2.5%.
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Motley Fool contributor James Mickleboro 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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