Labat Africa chief executive Brian van Rooyen admits that the company’s share price has been “taking a beating”, but says one of the reasons is that 19 million shares were sold when the share was between 18 cents and 10 cents. 

“There could be a number of reasons [for the share price falling]… I’m not going to pay a lot of money to find out what the reasons are, but the market in South Africa hasn’t really taken to cannabis yet,” he says.

As an example of this, Van Rooyen points to Cilo Cybin, a South African medical cannabis company that planned to raise R2-billion through a SPAC (special purpose acquisition company), but flopped when it failed to raise the minimum required by the JSE.

Cilo Cybin founder Gabriel Theron told investors they would be refunded and that the company would focus on new developments in the pipeline. 

“It is in the company’s best interest to focus on its growth initiatives and postpone listings to a later date,” he said in a statement issued in November 2022. 

Optimism follows dismal results

But back to Labat Africa. One reason for the fall in the share price could be the dismal results the company posted at the end of May 2022.

Shareholders would have seen the company take a hit of 21% on revenue at R23-million, while it also registered a loss of R34-million. The loss is attributed to impairments in line with international accounting standards (R16-million) and further investments into the healthcare (cannabis) operations (R12.5-million). That leaves a R5.5-million loss that was not addressed during the interview with Business Maverick.

Looking ahead, Van Rooyen is optimistic about the future of the company, banking on extraction agreements tied to the Sweet Waters cannabis cultivation and extraction facility in the Eastern Cape. 

“We were recently awarded an extraction licence, making us one of only three companies in the country that can legally extract not only CBD, but all types of THC, which we can then export,” he says.

In the current financial year that started in June 2022, revenue-generating activities have been increasing month-on-month. The major contributors have been the Sweet Waters cultivation operation and Labat’s Cannafrica retail operations.

Exports

Sweet Waters has successfully concluded the export of medicinal cannabis to Australia with frequency and volumes to increase over the financial year, with total exports expected to reach 200kg over the current financial year. 

Sweet Waters has also signed an additional offtake agreement with a Swiss company for the supply of 200kg of medicinal cannabis flower. 

Stanton van Rooyen, chief executive of Labat Healthcare, notes that the growing conditions in South Africa are phenomenal: 

“We are confident that we can supply Australia with 200kg over the current financial year. Our current facility allows us to satisfy the 200kg per annum requirement for Australia. In January, we are going to be expanding the facility by another 1,200m² of growing space, which will allow us to service the Switzerland offtake agreement.

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“Switzerland has indicated that they want 200kg a month, but we are going to ramp up to that,” he says.

Other expansion initiatives in the current financial year include opening more Cannafrica stores so that there are a total of 10 stores around the country by June next year. Each store has about three to four employees so management expects total job creation to be 30 to 40 by the end of the current financial year. 

The company is quite busy over the next few months. Construction of a medical cannabis extraction lab at the Sweet Waters site kicks off in January 2023 and is expected to be operational by April 2023, while globally Labat Africa plans to launch a pharmaceutical sales, marketing and distribution business in Germany in January. BM/DM