The growth generated by Mernova validates Creso Pharma’s strategy to drive revenue growth with a simultaneous focus on cost management.

Creso Pharma (ASX:CPH) announced that its 100%-owned Canadian cannabis cultivation and sales division, Mernova Medicinal, has reached cash flow positive in Q1.

This is a major milestone for Creso Pharma, as it represents the first cash flow positive operating division in the company’s history.

For the first quarter, Mernova delivered unaudited revenue of $1,547,252, which highlighted a whopping 46% increase on the previous quarter (Q4 FY2022: $1,061,275).

Creso says the material increase in revenue was driven by ongoing expansion across Canada, new product listings in Nova Scotia, and a number of large purchase orders  secured during the period.

This includes the largest purchase order Mernova had received since inception, which was valued at over ~$350k.

The purchase order represents the sixth Canadian province that Mernova has entered with the company now having a presence in 60% of Canada’s provinces with additional market entries pending.

During the quarter, Creso’s management has also continued to focus on the implementation of cost reduction initiatives, which is expected to continue over the coming quarters.

“Mernova has continued to gain strong brand awareness across Canada in recent months, which has led to a considerable increase in sales,” said Creso Pharma CEO, William Lay.

“Coupled with ongoing initiatives to reduce the group’s cost base, we are very pleased to have achieved a cash flow positive  position for the division during Q1 2023.”

Cost focus and strong brand image in Canada

Mernova has made rapid progress recently.

Along with the largest ever purchase order, the company announced in January that it has completed additional testing of cannabinoid content across four of its Ritual Green cannabis strains, which has highlighted significant THC content.

Testing showed Mernova’s most recent dried flower batch of French Cookies had total THC content of 30.97%, while Mac 1 had total THC content of 33.5% and 32.81% across two new batches.

These high-content THC strains provide Mernova with another competitive advantage, and are the strongest batches the company has released since its inception.

Today’s announcement reflects the company’s strong brand awareness in Canada, as well as improved distribution due to more product listings in key provinces  which have culminated in those large purchase orders.

Mernova’s cash flow position also validates Creso Pharma’s strategy to drive revenue growth along with a simultaneous laser-eyed focus on cost management to reach breakeven.

This momentum will now provide Mernova with a solid foundation for overall group performance across 2023 and beyond.

Creso Pharma said it is confident that it can continue this trajectory across other business units in the coming quarters, in a push to drive group profitability.

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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