Creso Pharma has now delivered two strong consecutive quarters, as it gears up to scale up the North American business following the potential merger with Red Light Holland.

Global medicinal cannabis company, Creso Pharma (ASX:CPH), is on track for another record sales growth during the quarter, underpinned by receipts from its wholly-owned Canadian subsidiary Mernova, and Swiss operations.

During the quarter, Mernova had received a bulk order from a large Quebec-based licensed cannabis producer for its dried flower cannabis products worth C$575,000 (around A$615k).

That purchase order has contributed to the total of $1.72 million that Creso has generated so far during Q2 of FY21, which represents a 24 per cent increase from the previous quarter, and a 451 per cent increase on the previous corresponding period .

The considerable increase in sales is a result of a strong demand for Mernova’s craft cannabis products, as well as Creso’s animal and human health CBD products.

The company expects additional sales to materialise in the coming weeks, which will allow  it to achieve a second straight quarter of record revenue growth.

In the first quarter of FY21,  the group had delivered a revenue of $1.385 million, an increase of 237 per cent compared to the previous corresponding quarter.

 

Revenue growth in line with strategy

The purchase order received by Mernova was from a Quebec-based cannabis licensed partner based in Montreal.

This partner has an established footprint across Canada and internationally, which would help Mernova to considerably expand its market reach in new provinces.

Mernova itself is a licensed cannabis producer in Canada that operates a facility scalable to 200,000 square feet.

Over the coming months, the company expects to receive ongoing purchase orders from this Quebec partner for similar or higher values.

Mernova has also secured a number of additional purchase orders from various provinces which include one from the Nova Scotia Liquor Corporation, New Brunswick’s only legal cannabis retailer.

It has also received orders from Yukon Liquor Corporation for its Ritual Green and Ritual Sticks pre-roll range.

In total, Mernova has generated a total of $1.04 million of sales revenue in Q2 of FY21 from these transactions.

Creso’s Swiss operations meanwhile, have contributed approximately CHF 469,000 (around A$675k) to the total quarterly revenue growth.

This mainly came from the sale of Creso’s high-quality CBD products for animals and humans, with the company anticipating additional sales to materialise before the quarter ends.

The recent revenue growth for the group is in line with Creso’s strategy of increasing sales in existing key markets.

“We expect to continue to grow revenues from our existing operations through new product launches, and ongoing international expansion efforts,” said Creso’s non-executive chairman, Adam Blumenthal.

“We have developed a very strong footprint in all of our key operating markets, and we anticipate a number of new provinces and countries to be unlocked over the coming months,” he added.

The anticipation of sales growth came following the potential merger with Ontario-based Red Light Holland.

The merger will create a global  psychedelics and cannabis company called The HighBrid Lab, which will potentially list on the Canadian Securities Exchange under the ticker symbol TRIP.

“The potential opportunity to merge with Red Light Holland and create The HighBrid Lab will add considerable optionality for the company, and allow us to enter the lucrative US market and other European nations seamlessly,” said Blumenthal.

 

Connecticut to provide a new market opportunity

Meanwhile, the State of Connecticut has just become the 19th state across the US to allow recreational cannabis use, after passing legislation on June 22.

The new legislation has legalised people aged 21 and over to possess and consume marijuana, and is expected to lay the groundwork for a new cannabis industry in the state.

Government representatives  anticipate that retail sales of recreational cannabis in the state will commence during 2022.

This legislative shift will provide Creso Pharma and Red Light Holland with a new market opportunity ahead of the potential merger.

Both companies are currently exploring go-to market strategies to scale up Mernova’s offering to progress an entry into the US cannabis market, which is expected to reach US$41 billion in value by 2025.

With the upcoming merger, Creso Pharma is very well positioned to capitalise on this emerging market of North America and unlock considerable value for its shareholders.

This article was developed in collaboration with Creso Pharma, a Stockhead advertiser at the time of publishing.

 This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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