Little Green Pharma (ASX: LGP) is making waves in the medicinal cannabis sector, buoyed by Denmark’s decision to make its pilot medicinal cannabis program permanent. The move cements the country’s position as a European hub for cultivation and export and underscores LGP’s strategic bet on its Danish operations.
Denmark’s revised framework is a game-changer. The country will now allow the importation of cannabis products and align its cultivation practices with international standards by relaxing restrictions on pesticide use. These changes, which reduce production costs and improve operational efficiencies, are poised to unlock significant value for Danish producers, including LGP. CEO Paul Long welcomed the news, stating, “These advancements will empower us to expand our footprint, improve patient access, and contribute to the growth of a robust, globally competitive medicinal cannabis sector.”
A Cultivation Powerhouse
LGP’s Danish facility is a jewel in its operations crown. Equipped with state-of-the-art greenhouses, it contributes to the company’s annual biomass production capacity of 30 tonnes across its global sites. The facility also positions LGP to benefit from Denmark’s enhanced export rules, which now allow the importation of active pharmaceutical ingredients (APIs) and cannabis products for processing and re-export. This flexibility enhances LGP’s ability to meet demand from high-growth markets like Germany and France, where medicinal cannabis is increasingly mainstream.
LGP's Denmark cultivation facility
Germany, the world's largest federally legal cannabis market, and France, where LGP is a leading supplier, are examples of LGP's strategic alignment with expanding regulatory opportunities. With its Danish facility poised to serve as a hub for European operations, the company is well-placed to leverage cross-border trade opportunities.
Financial Highlights: Revenue Growth Despite Challenges
For the half-year ending September 2024, LGP reported a 36.8% increase in revenues to $17.5 million, up from $12.8 million in the same period last year. This growth was driven by strong sales of medicinal cannabis oils and flower products across Australia and Europe. While the company posted a net loss of $3.5 million, up from $2.2 million a year earlier, its adjusted EBITDA turned positive at $268,000, compared to a negative $511,000 in the prior period.
The loss reflects investment in product development and expansion, with depreciation and amortisation contributing significantly to the result. Meanwhile, operating cash flow improved to $738,000, a notable recovery from the $1.8 million outflow in the previous corresponding period.
Strategic Shifts and Market Dynamics
LGP’s focus on Europe continues to yield results. Germany and France showed particularly strong growth, bolstered by Germany's legalisation of recreational cannabis and the expansion of medical use. Meanwhile, the UK market, long seen as underperforming, began showing signs of life.
The company also introduced the Indicare brand in September 2024, targeting growing market segmentation in the flower and oil categories. This diversification underlines LGP’s “House of Brands” strategy, which has proven effective in capturing distinct market niches.
Domestically, LGP subcontracted its Australian cultivation operations to focus on higher-value activities like product development and international sales. This move is expected to deliver cost savings and allow management to concentrate on growth opportunities abroad.
Danish Advantage
The new Danish framework aligns with global trends toward liberalisation and economic development in the cannabis sector. LGP’s facility in Denmark offers a strategic advantage, providing access to a well-regulated market and the infrastructure to support growing demand across Europe. By aligning its operations with these regulatory changes, LGP is positioning itself as a key player in the European medicinal cannabis industry.
While challenges remain—particularly in maintaining profitability amid rising costs and competition—the company’s strategic initiatives and investments in Denmark could prove transformative. For investors, the evolving European market offers a compelling backdrop against which LGP’s progress should be closely watched.
In a sector where adaptability and foresight often separate winners from also-rans, Little Green Pharma’s Danish pivot underscores its commitment to staying ahead of the curve.
