Israel-based, Roots Sustainable Agricultural Technologies Ltd (ASX: ROO) is engaged in developing and commercialising highly advanced disruptive technologies to solve some vital issues that the stakeholders in the agriculture sector are facing today, such as plant climate management and scarcity of water for irrigation.
To provide maximum benefits to farmers, the company has developed proprietary know-how with patents in place to maximise performance, reduce installation costs, and energy consumption through its two Key Offerings-
- Two-in-one root zone heating and cooling technology (RZTO), explained in the figure below.
- Irrigation by Condensation (IBC) Technology.
RZTO enhances cannabis yield for Ivo Lopez of Mendocino Natural Farms, US
Roots Sustainable Agricultural Technologies (Roots) has been strategically focused on proliferation of its business in North America for quite some time and has consistently reported success in this regard. Recently on 23 September 2019, Roots announced to the market that RZTO has improved the cannabis harvest yield by 40%, relative to prior year, at the growing facilities of Ivo Lopez of Mendocino Natural Farms in Northern California, United States. Besides the improved yield, the facilityâs projected number of annual harvests is forecast to double through a 30% reduction in annual growth cycles.
The AUD 42,300 worth of contract from independent cannabis producer, Ivo Lopez of Mendocino Natural Farms, was secured in early April 2019 and involved installation of the RZTO technology in multiple 1,000 square foot hoop houses at the farm property in Round Valley, California. Following the initial sale, the installation was completed during early spring which followed growing throughout the summer amid severe temperature fluctuations. It is to be noted that extreme temperatures significantly impact cannabis harvest production and the crop quality.
The roots of the cannabis crops were heated at night using the RZTO system, and a stable range of ~23 degrees centigrade was maintained, with air temperatures in the hoop house often dropping below 10 degrees centigrade.
Roots' CEO, Dr. Sharon Devir pleasingly commented on the recent development and stated that the team was extremely satisfied with the harvest results recorded for cannabis, that have validated the multiple benefits of the RZTO technology to high worth crops. He also added that the improvements in production and crop quality would further enable crop growers to generate an attractive and expeditious return on investment than is possible with other similar technologies. Also, the company plans to utilise these results in developing case studies which can be used to secure further sales and propel the growing business momentum in the North American cannabis market.
Strong Business Momentum in North American Cannabis market
The sale to Ivo Lopez was the second RZTO sale following the first one to industry leader Tim Blake in late March 2019 and building on the momentum in North America, the third sale was made to premium recreational and medical cannabis producer Canndescent (AUD 28,000-contract) for installation of RZTO at Canndescentâs greenhouse facilities in Southern California.
In June 2019, Roots executed the fourth sale (valued at AUD 43,450) of the RZTO technology, along with its monitoring and control system, to the large organic producer PRO, whereby it installed the proprietary RZTO cooling and heating technology in growbags and pots within hoop houses of varying sizes at the companyâs 300-acre certified organic farm in Santa Barbara County in Southern California, followed by commencement of planting in July 2019.
On 1 August 2019, Roots informed that it had achieved a 40% increase in the harvest yields of cannabis flower at Tim Blakeâs leased property in Laytonville, CA that houses the cultivation farm Little Hawk Collective, Inc, while also improving the quality output and the number of harvest per year from two to three.
Roots CEO Dr Sharon Devir had explained that the cannabis sector in California and Colorado was thriving with sales standing at USD 4.08 billion in 2018 alone. Going forth, this sector is estimated to undergo prodigious growth over the next four years with the total North American cannabis market forecast to reach USD 35 billion by 2023.
Thus, the company aims to fully benefit from this expected boom in North America through RZTO sales which is only effectively possible if the company establishes local on-the-ground presence in the United States and Canada. In line with this agenda, Roots announced on 28 June 2019, to have begun the recruitment of US-based senior management and operational staff to handle increased demand from customers and manage future RZTO installations.
Stock Performance
Roots Sustainable Agricultural Technologies Ltd has a market capitalisation of around AUD 4.47 million with approximately 89.3 million shares outstanding. On 24 September 2019, the ROO stock price settled the dayâs trading at AUD 0.049.
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