AGH Accelerates Peak USA Launch Amid Althea Division Challenges
Althea Group Holdings reported $5.02 million in Q3 FY25 receipts, driven by strong growth at Peak Canada and the launch of Peak USA, while its pharmaceutical cannabis division faces steep revenue declines prompting strategic review.
- Q3 FY25 customer receipts total $5.02 million with $2.62 million net operating cash outflow
- Peak Canada posts $4.2 million receipts, improves gross margins, and invests in inventory pre-purchasing
- Peak USA launches commercial manufacturing, producing over 550,000 units rapidly with $335,000 CAPEX
- Pharmaceutical cannabis division revenue falls 81%, triggering strategic review including potential divestment
- Company raises $4 million capital, converts loan notes to equity, and holds $2.08 million available funding
Financial Overview and Capital Management
Althea Group Holdings Limited (ASX: AGH) has released its quarterly results for the period ending 31 March 2025, revealing a mixed but strategically significant performance across its diversified cannabis beverage and pharmaceutical cannabis operations. The company recorded $5.02 million in customer receipts, with net cash used in operating activities of $2.62 million. This outflow included $1.3 million in non-recurring costs related to compliance, legal advisory, restructuring, and strategic investments.
AGH successfully raised $4 million in capital during the quarter through a combination of placements and convertible loan notes, with shareholder approval enabling the conversion of these notes into equity. This capital injection bolsters the company’s liquidity, with available funding standing at $2.08 million at quarter-end, though this represents less than one quarter of operating cash runway based on current outflows.
Peak Canada: Operational Resilience and Strategic Inventory Investment
Peak Canada, AGH’s wholly owned subsidiary focused on THC-infused beverages for the Canadian recreational cannabis market, contributed $4.2 million in receipts this quarter. Despite typical seasonal softness in winter months, the division improved its underlying gross margins compared to the prior corresponding period. A key strategic move was the pre-purchasing of core raw materials ahead of the anticipated peak seasonal demand from April to September. This inventory build-up temporarily increased cash outflows but is designed to secure supply continuity, lock in input costs, and enhance margin capture in the coming quarters.
Facility upgrades completed during the quarter have further strengthened Peak Canada’s production capabilities, positioning it well for stronger revenue and profitability in FY25 Q4 and FY26 Q1. Capacity versus utilisation metrics indicate the business is aligning production efficiently with available capacity, signalling operational leverage beginning to take effect.
Peak USA: Rapid Commercial Launch and Scalable Growth Platform
Peak USA, AGH’s U.S.-based subsidiary, commenced commercial manufacturing operations during the quarter, producing and shipping over 550,000 THC beverage units within weeks of launch. This rapid scale-up underscores strong early demand and commercial momentum in the U.S. alcohol-alternative FMCG market. A targeted capital expenditure of $335,000 was invested to expand production capabilities at the Florida facility, which is now fully operational with no significant near-term CAPEX anticipated.
Importantly, Peak USA’s domestic manufacturing and sales model insulates it from international tariff risks, enhancing its competitive positioning for scalable revenue growth. Cash receipts from these operations are expected to materialise in the June quarter, potentially marking a significant inflection point for AGH’s revenue trajectory.
Pharmaceutical Cannabis Division: Revenue Decline and Strategic Review
In stark contrast, AGH’s pharmaceutical cannabis business, Althea, recorded cash receipts of just $802,000 for the quarter, representing an 81% decline compared to the prior corresponding period. Despite achieving approximately $3.9 million in annualised cost savings over FY24–FY25, the revenue decline has outpaced these rightsizing efforts.
The division also faced operational setbacks, including a key UK SKU failing final quality testing, which constrained anticipated revenue recovery. In response, AGH is nearing completion of a comprehensive strategic review of the Althea division, exploring options to restore sustainable profitability or maximise shareholder value, including potential divestment. Any such transaction would be subject to regulatory approvals and shareholder consent.
Outlook and Strategic Focus
AGH’s management emphasises that excluding one-off and strategic investment costs, underlying operating cashflows are improving, reflecting stronger operational control and disciplined cost management. The company expects improved cash flows and operational performance in the June quarter and beyond, driven primarily by Peak Canada’s seasonal growth and Peak USA’s commercial ramp-up.
With the majority of strategic investments now complete, AGH is positioned to capitalise on margin expansion opportunities and scalable revenue growth. The company’s focus will likely sharpen on its cannabis beverage businesses in Canada and the U.S., while the outcome of the Althea division’s strategic review will be a critical determinant of its future portfolio and financial sustainability.
Bottom Line?
AGH’s near-term prospects hinge on Peak USA’s revenue ramp and the strategic resolution of its pharmaceutical cannabis division.
Questions in the middle?
- Will Peak USA’s strong initial shipment volumes translate into sustained revenue growth in FY26?
- What are the potential outcomes and timelines for the Althea division’s strategic review and possible divestment?
- How will AGH manage liquidity beyond the current 0.79 quarters of available funding amid ongoing operational cash outflows?
