Merino & Co. Reports 60% Revenue Drop and $1.53M Half-Year Loss
Merino & Co. Limited reported a 60.5% drop in revenue and a 28.2% increase in net loss for the half-year ending December 2025, reflecting a strategic investment phase aimed at future growth. The company is expanding production capacity and building inventory ahead of wholesale expansion, signaling a pivot towards revenue acceleration.
- Revenue declined 60.5% to $942,010
- Net loss increased 28.2% to $1.53 million
- Significant investments in production capacity and inventory
- Marketing and R&D spend accelerated to support brand growth
- Material uncertainty on going concern noted by auditors
Strategic Investment Phase Drives Losses
Merino & Co. Limited has reported a challenging half-year financial result for the period ending 31 December 2025, with revenues falling sharply by 60.5% to $942,010 and net losses widening by 28.2% to $1.53 million. While these figures might raise eyebrows at first glance, the company attributes the downturn to a deliberate strategic investment phase rather than a decline in market demand.
During this period, Merino & Co. focused on expanding its production capacity, increasing inventory levels in preparation for wholesale orders, and intensifying marketing and brand positioning efforts. These initiatives have driven up operating expenses but are designed to lay the groundwork for accelerated revenue growth and improved operating leverage in future periods.
Building Foundations for Wholesale Expansion
The company has ramped up manufacturing runs and strengthened its supply chain, anticipating increased demand both domestically and internationally. This has included strategic procurement of raw materials and stockpiling inventory to ensure product availability and reduce lead times for wholesale partners. While these upfront costs have weighed on short-term profitability, they are expected to convert into stronger sales volumes and margins as wholesale operations scale.
Marketing investments have also intensified, with a focus on digital campaigns, e-commerce platform enhancements, and content production to boost brand awareness and customer acquisition. Alongside this, Merino & Co. continues to invest in research and development, particularly in product innovation and sustainability, to maintain competitive differentiation in the wool products market.
Financial Position and Going Concern Considerations
The company’s net tangible assets per share have decreased from 8.62 cents to 5.70 cents, reflecting the increased losses and investment outlays. Cash reserves have also declined, with cash and cash equivalents standing at $1.17 million as at 31 December 2025, down from nearly $3 million six months earlier. Operating cash outflows remain significant, underscoring the ongoing investment phase.
Auditors have issued an unqualified review report but highlighted a material uncertainty regarding Merino & Co.’s ability to continue as a going concern. The directors remain confident, however, citing cash flow forecasts and potential capital raising initiatives such as share placements or entitlement offers to support working capital needs.
Signs of Momentum Post-Period
Since the reporting period, Merino & Co. has secured a $300,000 purchase order from its Australian distribution partner, a positive signal of rebuilding momentum in its domestic wholesale footprint. This order aligns with the company’s strategy to strengthen commercial partnerships and drive revenue growth.
Share-based payments to directors and key management personnel were approved at the recent AGM, aligning leadership incentives with long-term shareholder value creation. The company’s focus on governance and corporate infrastructure also reflects readiness for future strategic collaborations and capital market activity.
Bottom Line?
Merino & Co.’s current losses underscore the risks of its growth strategy, but early wholesale traction and planned capital initiatives could pivot the company towards a more sustainable financial footing.
Questions in the middle?
- How soon will Merino & Co. translate its inventory build and production capacity into meaningful revenue growth?
- What are the company’s plans and timelines for raising additional capital to mitigate going concern risks?
- How will competitive pressures and market demand in the wool products sector impact Merino & Co.’s growth trajectory?
