Thursday 2nd December, 2021

Issue No.69

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The Prosperity of Industrial Hemp

Cannabis is a good business, and there are a lot of people out there surfing that wave, especially when it comes to the prosperity of industrial hemp. In countries where there are legal uses, there are companies accounting for profits in the millions.

Here is an example: HempFlax, a European organization among the largest industrial hemp market, is a variation of cannabis with a tetrahydrocannabinol (THC) content ranging from 0.2 to 0.3 without the possibility of generating a psychoactive effect.

They had 43% revenue growth in 2020, reaching €14.5 million. EBITDA (Earnings before interest, taxes, depreciation, and amortization or Earnings before interest, taxes, depreciation, and amortization) increased 63% to €1.8 million, with earnings before tax growing 616% from €92,000 in 2019, for €659,000.

green plant in persons hand. HempFlax, a European organization among the largest industrial hemp market, is a variation of cannabis with a tetrahydrocannabinol.

In 2021, preliminary results show continuity in this growth. Reported sales for the first quarter of 2021 increased 27% over last year.

Headquartered in the Netherlands, HempFlax benefits from advanced legislation on cannabis, not only in its country but in many others in Europe, which already understand hemp as a valuable industrial raw material.

The company was founded in 1993 by Ben Dronkers. The entrepreneur wanted to bring back the glory years of hemp, a material with a wide presence in human history, responsible for countless positive contributions over the centuries. The first records of the use of its fibers in fabrics, paper, and other purposes date back to ancient Egyptian times.

Hemp Prosperity in the Cannabis Market

Today, HempFlax operates in six segments within the industrial hemp sector: cultivation, cannabidiol (CBD) for therapeutic purposes, hemp plastics, animal care, genetic enhancement, and construction materials. However, the substantial growth in recent times has taken place in some specific niches, such as:

Construction materials are an important application for HempFlax. About a year ago, HempFlax bought Thermo Natur, a German manufacturer of natural fiber insulation materials. This acquisition made HempFlax's sales grow tenfold in the building materials segment. In 2020, the jump was 1,089%, with products intended mainly for applications in residential construction, with greater strength in southern Germany and Austria. Insulation produced with hemp fibre is more efficient than its most commonly used competitor in Europe, composed of fiberglass, as well as being more sustainable, consuming less energy and emitting 25 times fewer CO² per cubic meter in the production process.

In the CBD market, HempFlax's CBD sales grew 42% in 2020, concentrated on the company's own-brand products and inputs supplied to Jacob Hooy, a brand sold through Holland & Barrett, a UK health food store chain. The good result, according to HempFlax highlighted in a recent statement, is due to strong consumer demand in the pandemic scenario, with many people interested in ensuring well-being and quality of life.

person holding green and yellow handle scissors, care of industrial hemp

As for the automobiles industry, the company produces highly refined hemp fibers used by the automobile industry to replace fiberglass in the manufacture of parts. Sales in this niche grew 12% last year. HempFlax supplies automakers such as Bugatti and Porsche and is the only one in the world whose hemp fibers are certified to International Sustainability and Carbon Certification (ISCC) standards. In this market, hemp fibers represent a sustainable alternative to synthetic, mineral, and wood fibers.

The scenario could be better. Despite the super positive results, Mark Reinders, CEO of HempFlax, highlights, even in Europe, a scenario of much regulatory uncertainty for businesses based on cannabis.

"This was achieved against an unfortunate backdrop of regulatory uncertainty – notably in the CBD sector, but present throughout the industrial hemp industry. This uncertainty threatens to stifle innovation and competitiveness," Reinders said of HempFlax's 2020 performance.

The CEO pointed out, in a company statement, the need for the United Kingdom and the European Union (EU) to raise the maximum levels of THC in the CBD to 0.3%. "Doing this would make it easier to grow more varieties and align the European regulatory framework with that of other countries like the United States," he said.

The European Parliament voted last October to raise the authorized level of THC for industrial hemp plants from 0.2% to 0.3%. However, the change is not expected to take effect across the EU until 2023.

What is going to be industrial hemp's future? Prosperity is a word that defines the current moment for HempFlax and for the hemp industry as a whole. Can improve? Yes, – like almost everything in life – and it goes. More and more countries are opening up to this market and leaving the criminalization of this so versatile and profitable plant in the past. Soon Brazil will also enter this sea and will certainly hitch a ride on this wave.

green plants on white metal frame, in industrial hemp

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