Aphria profits rise on sale of Liberty Health Science

which doubled yearover-year, to $10.3 million from $5.1 million.

“This includes $1.1 million from Broken Coast during the month of February, the first month of our ownership,” Aphria chief financial officer Carl Merton, said on a call with analysts. Aphria acquired the boutique B.C. grower in January for roughly $230 million, mostly in shares.

New medical patients also drove revenue growth, with Aphria selling around 270,000 gram equivalents (of dried bud and oil) to patients on-boarded in the third quarter.

Retail prices were up, with the average gram selling for $8.30 compared to $8.10 in the previous quarter (wholesale excluded). Meanwhile, “all-in cost of sales” declined to $1.56 a gram from $2.13 in the second quarter.

While the company sold 445 kilograms to other licensed producers in the three months leading up to Feb. 28, the quarter marked a turning point in Aphria’s strategy, chief executive Vic Neufeld said on the analyst call.

The company will no longer sell marijuana wholesale to other LPs, in order to stockpile product ahead of recreational legalization, which is expected sometime in late summer or early fall.

“If we don’t have 8,000 to 10,000 kilos available for the rec market in the month of September, then we will not be able to service what we are projecting to be the conservative opening order from various provincial regulators,” Neufeld said.

Like other licensed producers, Aphria is racing to build new facilities or adapt existing greenhouses in expectation of recreational demand.

It recently completed a 200,000-square-foot greenhouse expansion, which Neufeld says will start producing in the coming weeks. A further million square feet of greenhouse space is under construction, although it won’t come online until January 2019.

“We can struggle from October through January,” Neufeld said.

Unlike other large LPs, such as Canopy Growth Corp. or Aurora Cannabis Inc., Aphria hasn’t begun to generate revenue from cannabis exports.

It acquired Nuuvera Inc., which it has rebranded as Aphria International Inc., after the end of the third quarter, in an attempt to match its competitors’ international scope. It’s still waiting, however, on GMP certification for its facilities, which is a prerequisite for selling marijuana into Europe.

Recent developments in the U.S., however, may give Aphria at least one competitive edge internationally, thanks to its investment in Liberty Health.

On Friday, it was reported that U.S. president Donald Trump was considering protecting states that had already legalized marijuana from federal government intervention.

“We’re very excited,” said Neufeld. “This is just another advancement of getting to the position where medical cannabis in the U.S. moves to a Schedule II (drug).”

While Aphria has agreed sell off its stake in Liberty Health, this is happening in several stages due to Canadian Securities Exchange escrow rules. Aphria is expected to sell off another 15 per cent stake in Liberty Health in July.

“Will there be enough advancement between now and late July? Probably not,” Neufeld said. But if Trump does take a more accepting approach to marijuana, the TMX Group “will focus more eyeballs on what’s happening in the U.S.,” Neufeld said.