Elixinol sells Hemp Foods Australia to Chinese buyer

One of Australia's largest cannabis and hemp companies will rack up more than $17 million in impairment charges after a decision to exit two major subsidiaries.

Shares in Elixinol Global (ASX: EXL) lost around a fifth of their value this morning ($22.57 million) after it was announced Hemp Foods Australia (HFA) would be sold to a Chinese buyer for $500,000 and Nunyara would scrap plans to apply for an Australian medicinal cannabis licence.

The sale of HFA to Yunnan Lvxin Biological Pharmaceutical Co - a subsidiary of Shanghai Shunho New Materials Technology Co - still depends on a licence agreement between Elixinol and Shunho.

The licence would give the Chinese group an exclusive licence to manufacture and distribute Elixinol-branded hemp-derived CBD products in mainland China, Hong Kong, Taiwan and Macau.

Elixinol claims the deal will likely lead to a non-cash impairment charge of $12.5 million for FY19, however operating cashflow will allow it to focus capital and resources on its hemp-derived CBD business.

"We are pleased at the opportunity Hemp Foods Australia will have under Shunho's guidance and the ability to leverage Shunho's experience in hemp cultivation, manufacturing and distribution, particularly in Asia," says group chief executive officer Stratos Karousos.

"During negotiations of the sale of HFA, it became apparent that Elixinol could benefit from Shunho's extensive experience and reputation in Greater China and we have agreed 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 aligns with our global strategy."

Meanwhile, the decision to discontinue Nunyara will lead to an impairment change of $4.8 million that will be reflected in the FY19 financial statements, as assets will be sold with proceeds to be redeployed to support Elixinol's CBD operations.

Hemp Foods Australia was the reason Colorado-based Elixinol LLC listed on the ASX in the first place in January 2018, with the pair joining forces to create a global brand.

Cannabis and hemp stocks have taken a battering globally in the past 12 months due to oversupply issues and regulatory hurdles, and Elixinol is now worth a tenth of what it was in the highs of April last year.

In July the group announced board changes ahead of its international expansion, with co-founder Paul Benhaim (pictured) stepping down from the CEO role to become Elixinol's role of chief innovation officer.

Cannadoc acquired by Cronos Australia

In other cannabis industry news, Canadian cannabis company Cronos Group has acquired a 51 per cent stake in Australian medicinal cannabis clinic operator Cannadoc for $300,000 via its Australian arm Cronos Australia (ASX: CAU) and wholly-owned subsidiary Medical Clinic Holdings.

Cannadoc is a growing medical practice in Melbourne from which a range of cannabinoid-based and other treatments have been provided to its patient base since its founding in early 2019.

Under the terms of the agreement Cronos Australia has appointed two representatives to the Cannadoc board to sit alongside the Melbourne-based group's founders Dr David Feng and Kevin Brabazon.

"We are excited about the opportunity to bring Cannadoc into the Cronos Australia group," says Cronos Australia CEO Rodney Cocks.

"We also look forward to working closely with David and Kevin to expand the Cannadoc business."

Retraction: A previous version of this article incorrectly referred to Hemp Foods Australia (HFA) as Hemp Farms Australia, which remains in the same hands as before. 

Business News Australia