stats
globeinteractive.com: Making the Business of Life Easier

   Finance globeinvestor   Careers globecareers.workopolis Subscribe to The Globe
The Globe and Mail /globeandmail.com
Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space


Search

space
  This site         Tips

  
space
  The Web Google
space
   space



space

  Where to Find It


Breaking News
  Home Page

  Report on Business

  Sports

  Technology

space
Subscribe to The Globe

Shop at our Globe Store


Print Edition
  Front Page

  Report on Business

  National

  International

  Sports

  Arts & Entertainment

  Editorials

  Columnists

   Headline Index

 Other Sections
  Appointments

  Births & Deaths

  Books

  Classifieds

  Comment

  Education

  Environment

  Facts & Arguments

  Focus

  Health

  Obituaries

  Real Estate

  Review

  Science

  Style

  Technology

  Travel

  Wheels

 Leisure
  Cartoon

  Crosswords

  Food & Dining

  Golf

  Horoscopes

  Movies

  Online Personals

  TV Listings/News

 Specials & Series
  All Reports...

space

Services
   Where to Find It
 A quick guide to what's available on the site

 Newspaper
  Advertise

  Corrections

  Customer Service

  Help & Contact Us

  Reprints

  Subscriptions

 Web Site
  Advertise

  E-Mail Newsletters

  Free Headlines

  Globe Store New

  Help & Contact Us

  Make Us Home

  Mobile New

  Press Room

  Privacy Policy

  Terms & Conditions


GiveLife.ca

    

PRINT EDITION
Cannabis supply issues, writedown drag down Aphria results
space
space
By DAVID MILSTEAD, MARK RENDELL
  
  

Email this article Print this article
Tuesday, April 16, 2019 – Page B1

Aphria Inc.'s first full quarter of Canadian recreational cannabis sales saw the company book less pot revenue in three months than it did in the first six weeks after legalization.

That news, which the company blamed on supply shortages and packaging and distribution problems, was one item of a host of disappointing numbers that drove the company's shares down more than 14 per cent in Monday trading in Toronto.

At the prompting of securities regulators, Aphria is also taking a writedown on Latin American assets that were at the centre of a short-sellers' December report.

Aphria also said that a takeover bid from U.S. cannabis company Green Growth Brands Inc. will end in accordance with an agreement between the two.

The company said revenue from "adult-use" cannabis for the 2019 fiscal third quarter ended Feb. 28 was $7.19-million versus $11.03-million in the quarter that ended Nov. 30, 2018, when there were roughly six weeks of sales after the Oct. 17 legalization date.

That's a decrease of 34.9 per cent - but on a daily basis, Aphria posted two-thirds less cannabis revenue in the most recent quarter.

Investors sent most cannabis stocks down Monday, although Aphria suffered more than most.

It was the latest disappointing sales report from a Canadian cannabis company that contrasted with their stubbornly high market values.

In late March, Cronos Group Inc. said it sold just $5.6-million of pot in the three months that ended Dec. 31. Tilray Inc.

reported $15.5-million in sales for the same quarter. The two companies have market values of $7.5-billion and US$5-billion, respectively.

Still, there was evidence that Aphria was having special problems. Organigram Holdings Inc., which also reported sales Monday for the same period, more than doubled its revenue from the prior quarter, to almost $27-million.

"Kilogram equivalents" of sales, a metric that accounts for the fact active ingredients in cannabis can be delivered via plant, oil, or other formats, fell to 2,636 from 3,408 in the prior quarter, a drop of nearly 23 per cent.

The company's average pretax selling price in the recreational market dropped nearly 20 per cent and production costs also shot up 44 per cent from the prior quarter.

Aphria chief financial officer Carl Merton said the company entered the fiscal third quarter, which began Dec. 1, with lower inventory levels, then faced supply shortages as it changed its growing methods and allocated more space to the "mother plants" that produce future cannabis-bearing plants. He described packaging and distribution problems as "temporary" and said some of the revenue issues were the result of Aphria's own "pro-active decisions ... as we continue to position our business for long-term growth and success."

However, he also warned of another poor quarter when Aphria closes the books at the end of May, with cannabis sales "similar" to the quarter it just reported.

Aphria said the Ontario Securities Commission asked the company to perform an "impairment test" on its assets in Colombia, Jamaica and Argentina, acquired in 2018 and targeted by short-sellers in December who said Aphria had significantly overpaid, benefiting insiders and others close to the company.

In mid-February, Aphria said a special committee had reviewed the matter and found the prices "within an acceptable range ... be it near the top." But it also telegraphed Monday's writedown, telling investors it would be following accounting rules and assessing their value.

The writedown clips $50-million from the value of the assets; Aphria still puts them at $225-million. That's more than the original price of $193-million, although the value of the all-stock deal ballooned to $297-million as Aphria's share price rose in the summer of 2018.

The adjustment was "the result of new financial information" received from the advisers to the board's special committee, Aphria said.

Aphria's total revenue increased to $73.6-million from $21.7-million in the prior quarter, largely on the strength of sales from European pharmaceutical distributors CC Pharma and ABP. Net loss for the 2019 fiscal third quarter was $108.2-million, or 43 cents a share, compared with net income of $54.8-million, or 22 cents, in the prior quarter. In the prior-year quarter, net income was $12.9-million, or 8 cents.

Aphria said it has struck a deal under which Ohio-based Green Growth Brands will abandon a takeover bid it first floated in late December, after Aphria's shares had been damaged by the short report. Green Growth Brands will pay $89-million to buy back its own shares from GA Opportunities Corp., a cannabis company that owes Aphria $55-million for assets Aphria sold it. GA Opportunities will pass the $89million from Green Growth Brands along to Aphria to pay off the note and a related option. As part of the deal, Green Growth's bid to acquire Aphria will now expire April 25.

Gabriel Grego of Quintessential Capital Management, one of the short-sellers who authored the December report, said that "as our research showed, the company's actual performance was not what they were telling the market. We respect the new management team, which is undertaking the challenging job of fixing the dire situation left behind by their predecessors."

Aphria said in January that chief executive Vic Neufeld would exit; he left the board March 1. The company is currently being run by Irwin Simon, the company's board chairman and acting CEO, and the founder and former CEO of natural-foods company Hain Celestial Group Inc.

APHRIA (APHA) CLOSE: $11.50, DOWN $1.91


Huh? How did I get here?
Return to Main Rob_Carrick Page
Subscribe to
The Globe and Mail
 

Email this article Print this article

space  Advertisement
space

Need CPR for your RSP? Check your portfolio’s pulse and lower yours by improving the overall health of your investments. Click here.

Advertisement

7-Day Site Search
    

Breaking News



Today's Weather


Inside

Rick Salutin
Merrily marching
off to war
Roy MacGregor
Duct tape might hold
when panic strikes


Editorial
Where Manley is going with his first budget




space

Columnists



For a columnist's most recent stories, click on their name below.

 National


Roy MacGregor arrow
This Country
space
Jeffrey Simpson arrow
The Nation
space
Margaret Wente arrow
Counterpoint
space
Hugh Winsor  arrow
The Power Game
space
 Business


Rob Carrick arrow
Personal Finance
space
Drew Fagan arrow
The Big Picture
space
Mathew Ingram arrow
space
Brent Jang arrow
Business West
space
Brian Milner arrow
Taking Stock
space
Eric Reguly arrow
To The Point
space
Andrew Willis arrow
Streetwise
space
 Sports


Stephen Brunt arrow
The Game
space
Eric Duhatschek arrow
space
Allan Maki arrow
space
William Houston arrow
Truth & Rumours
space
Lorne Rubenstein arrow
Golf
space
 The Arts


John Doyle arrow
Television
space
John MacLachlan Gray arrow
Gray's Anatomy
space
David Macfarlane arrow
Cheap Seats
space
Johanna Schneller arrow
Moviegoer
space
 Comment


Murray Campbell arrow
Ontario Politics
space
Lysiane Gagnon arrow
Inside Quebec
space
Marcus Gee arrow
The World
space
William Johnson arrow
Pit Bill
space
Paul Knox arrow
Worldbeat
space
Heather Mallick arrow
As If
space
Leah McLaren arrow
Generation Why
space
Rex Murphy arrow
Japes of Wrath
space
Rick Salutin arrow
On The Other Hand
space
Paul Sullivan arrow
The West
space
William Thorsell arrow
space





Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space

© 2003 Bell Globemedia Interactive Inc. All Rights Reserved.
Help & Contact Us | Back to the top of this page