2026 First Quarter Operational Summary
The first quarter of 2026 saw the Company record modest operating results due to the known transition from blended fertilizer to the commercial scale ramp-up in granulated fertilizer at the Beiseker facility. Of note in the first quarter results are a strong proof-point of granulated fertilizer gross profit margins before other direct costs out of the Beiseker facility, coming in at 29%. Upon full scale production of 2,000 metric tonnes per month, the Company continues to expect granulated and pellet fertilizer gross profit margins before other direct costs to range from 25%-35%.
As of the date of this press release, the Company is nearing the final completion of the Beiseker facility load out tower and has begun preparing for 24-hour production runs by hiring additional plant operators. The Company now expects the Beiseker facility to be capable of the full 2,000 metric tonnes per month of production by the third quarter of 2026. In addition, as of the date of this MD&A the Company has recorded record year-to-date production and sales of granulated fertilizer, with the second quarter volumes already significantly surpassing first quarter sales. The Company expects this trend to continue throughout the second quarter and continuing to build for the rest of 2026 on the back on higher demand for locally produced fertilizer given the geopolitical events in the middle east disrupting internationally supplies of fertilizer. Importantly, Replenish is ideally positioned to take advantage of this increased demand in the coming months.
Alongside the final commissioning of the Beiseker facility, the Company has also partnered with the Beiseker Hutterite colony to produce the Company's patented pellet fertilizer in a facility at the Beiseker Hutterite colony. This facility is expected to produce approximately 1,000 metric tonnes of pellet fertilizer per month and represents a meaningful inroad to future large-scale production facilities at other Hutterite colonies in Canada. The Company expects initial production and sales to occur in the third quarter of 2026 and expects the same 25%-35% gross profit margins before other direct costs as the granulated fertilizer products.
The first quarter also saw significant progress on the Company's two licensing deals with Farmers Union and MJ Ag, with both partners achieving significant construction and commissioning milestones. The Company expects both licensing deals to begin initial production by the third quarter of 2026, and scaling to the annualized production capacities of 50,000 and 10,000 metric tonnes, respectively, by the end of 2026.
As the Company transitions to higher granulated production and sales volumes at Beiseker and begins to receive licensing fees from the sale of pellet fertilizer, overall revenues, margins, pricing and sales volumes are expected to increase. As the first quarter demonstrated, the Company is achieving strong gross profit margins on the granulated product that is has sold and continues to forecast granulated and pellet gross margins between 25% and 35% before other direct costs as it reaches full scale capacity of 2,000 metric tonnes per month at Beiseker. The Company also continues to forecast blended fertilizer sales to achieve 10% and 15% gross margin before other direct costs on a run-rate basis going forward.
Finally, as previously disclosed, the Company completed a private placement financing during the quarter for proceeds of approximately $4.8 million, further strengthening the Company's balance sheet.
CEO Commentary
"We are highly encouraged by our Q1 performance, where early granulated fertilizer sales delivered a strong 29% gross margin before other direct costs. This validates our long-term margin target of 25% to 35% before other direct costs as we drive toward full scale commercial operations," said Neil Wiens, CEO of Replenish Nutrients. "With our Beiseker facility capable of full capacity ...
