Ann: European Co-Codamol submissions completed, page-22

Hi Rasaj,

The inventory build isn't a strategic decision on Palla's part. It reflects a structural weakness of their business model and poor execution.

They contract poppy growers to grow a certain quantity and agree to buy it at a set price in advance. Tasmanian poppies are harvested between Dec and February and are paid for in the Jan-June half ($5m of the recent capital raising was to pay for more inventory that they don't need!).

So just as COVID was kicking off last year, Palla was forced to buy lots of poppy straw, even though end-user demand was cratering. They already held too much inventory prior to that due to missed production targets.