The Ecofibre Ltd (ASX: EOF) share price has been a poor performer on Thursday.
At one stage today, the hemp company's shares were down as much as 16% to $1.51.
The Ecofibre share price has since bounced back a touch but remains down 9% to $1.64 at the time of writing.
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Why is the Ecofibre share price sinking?
Investors have been selling Ecofibre shares after the release of a very disappointing half year result.
For the six months ended 31 December, the company reported a 49% decline in revenue compared to the prior corresponding period to $14.7 million.
Management advised that this was driven by a significant reduction in nutraceutical segment revenues. This more than offset growth in its food and hemp black segments.
Unfortunately, it gets worse from here. The change in its revenue mix has impacted its margins negatively, leading to a reduction in its gross margin from 81% to 65%.
This could still reduce further from here. Management notes that its Ananda Health margins remained strong at 76% during the half but are expected to narrow following price changes in November.
This ultimately led to the company reporting a loss after tax of $5.5 million for the half. This compares to a $7.1 million profit in the prior corresponding period.
Outlook
Management advised that it will continue to invest in its core business and will not reduce its long term focus for short term results.
It expects its Hemp Black and Ananda Food segments to continue to see growth as they establish new clients and markets and achieve scale respectively.
Nevertheless, this won't be enough for a return to profit. Management is expecting the company to record a loss of around $1.5 million during the second half. This will result in a full year loss of approximately $7 million for FY 2021.
