AGH quarterly shows increased sales and production

Our THC drinks Investment Althea Group Holdings (ASX: AGH), just released its September quarterly report.

AGH is our way of getting “pick and shovels” exposure to an industry that we think will grow over the medium term - THC infused drinks.

Targeting one of the fastest growing consumer industries in the USA...

THC-infused drinks are one of the fastest growing consumer industries in the USA - becoming more popular as a replacement for alcoholic drinks.

THC (tetrahydrocannabinol) is the main psychoactive compound found in the cannabis plant...

In other words it's the substance in marijuana that gets you high.

AGH’s manufacturing division (Peak Processing Solutions) holds a ~33% share of the Canadian THC-infused beverage market, representing around 28% of all national brands.

AND AGH just recently opened a manufacturing facility in Florida (USA), looking to replicate the success and growth shown from the Canadian market.

(Source)

AGH explicitly stated in yesterday’s quarterly that the US THC-infused beverage market is currently exceeding $1 billion in annual retail sales, with forecasts projecting growth to $4.1 billion by 2028. (source)

So the main things we were looking out for in the quarterly wasn’t so much the financials but more so the growth prospects in the USA.

Here were some of our key takeaways from the quarterly:

1. Canadian production increased - AGH produced ~141,312 cans (up from 119,709 in Q4 FY24-25)
2. Three new deals being worked on in Canada - AGH said that “discussions” were “underway to onboard three new Canadian customers of similar size”. So numbers in Canada could get even bigger in the coming quarters.
3. US production is ramping up - AGH had two production runs in the US in July and August. Total produced since January in the US is now ~560,000 cans with 300,000 cans planned for production in November. (that would add more than 50% more to total production in the US)
4. Two new customers in discussions in the US - AGH also confirmed that discussions were ongoing to onboard two new US customers which could increase production further here.
5. Cash receipts were up by $1.1M - Cash receipts were up again to $5.4M versus $4.3M in the last quarter. (mostly from the increased production numbers in Canada).
6. Gross margins were slightly down - We did notice that gross margins were down from 39% to 31%, but that is to be expected given AGH are trying to grow sales in the US. AGH also mentioned some disruptions due to strikes in British Columbia that stopped production for 4 weeks…

So it looks like there is a fair bit of traction for AGH in the US (and Canada)…

Now we just need to see a gradual ramp up of production and for that to eventually translate into improved financial metrics for AGH.

The 11 reasons we invested in AGH

We Invested in AGH back in July at 2.5c per share.

For those who haven’t read it yet, check out the full initiation note here: Our New Portfolio Addition: Althea Group Holdings (ASX: AGH)

Here is a quick overview of the 12 key reasons why we Invested in AGH. These were all published in that initiation note.

1. Consumer drinking habits are changing, THC drinks to replace alcohol?
2. AGH is the biggest manufacturer of THC beverages in Canada - $8m+ revenues in 6 months
3. The Canadian business has capacity to grow even further - currently operating at ~22% of its total capacity
4. AGH has just entered the US market, the much bigger, faster growing market for THC beverages
5. AGH’s business model is based on a Coca-Cola style distribution model
6. AGH already has deals with major companies like A$3.34BN Boston Beer Co
7. AGH has its own drink brands... one could go “viral”
8. AGH has just restructured its business, cutting costs and selling non-core assets.
9. Big Alcohol has come into the THC drinks space in the past... will they do it again?
10. AGH can design, develop and produce a THC version of ANY existing, popular drink
11. THC drinks could go through a big “popularity” wave