Canopy Growth, the country’s largest cannabis producer, published unexpectedly weak financial results Thursday morning, likely presaging a tough day on the stock markets for the entire sector.
While revenues for the second fiscal quarter ended Sept. 30 surged 228 per cent year over year to $76.6 million, they fell significantly short of the consensus estimate of $108 million, as tracked by Thomson Reuters. Canopy Growth’s revenues were sharply lower than expected due mainly to a deduction of $32.7 million from gross revenues of $118.3 million for returns and pricing allowances related primarily to its portfolio of softgels and oils.
“The last two quarters have been challenging for the Canadian cannabis sector as provinces have reduced purchases to lower inventory levels, retail store openings have fallen short of expectations, and Cannabis 2.0 products are yet to come to market,” said company CEO Mark Zekulin.
Canopy Growth took a $15.9 million restructuring charge related to re-aligning its inventories and product lines in line with weaker-than-anticipated sales.
Canopy Growth also reported a second quarter net loss of $374.6 million, reflecting the company’s heavy investments in new production capacity, retail outlets, hiring and marketing. The company’s net loss in the same quarter a year earlier was $330.6 million.
The extent of the firm’s spending can be seen in its cash balance. While it remained quite healthy at $2.7 billion at the end of September, this was down from $4.5 billion a year earlier.
“This marks the end of significant expansion investments in Canada and we are confident that the high quality, differentiated beverage, vape and edible products that we are bringing to market combined with a retail channel that we expect to grow significantly next fiscal year, will drive the next leg of growth for our business,” Zekulin said in a statement.
More to come.
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