Aurora earnings offer glimpse into legal cannabis market

Edmonton-based producer was able to meet ‘just about all’ of its supply obligations

Aurora Cannabis saw “strong demand” for recreational pot during the initial few weeks of legalization in Canada and it expects consumer appetite to continue to outstrip supply for “some time.”

The Edmonton-based pot producer was able to meet “just about all” of its supply obligations leading up to and after pot for adult use was legalized on Oct. 17, but it will take time to ramp up its cannabis production in the coming quarters, said Cam Battley, Aurora’s chief corporate officer.

“We, we think, have done better than other companies, our peers. We will be ramping up, we will be able to pick up some of the slack soon. But we can’t do that immediately.”

The cannabis producer’s comments came as it reported its results for the three months ended Sept. 30.

During the first quarter of its 2019 financial year, it delivered revenue of $29.7 million, more than triple the

$8.2 million during the same period last year.

It also posted a profit of $104.2 million, up from nearly $3.6 million a year ago, boosted by an unrealized non-cash gain on derivatives and marketable securities.

Analyzing the performance of marijuana companies is difficult because of accounting rules used in the agriculture industry that require companies to put a value on their pot plants before they are harvested, and approaches differ between producers on how to apply these guidelines.

The rollout of adult pot use in Canada has been plagued with problems, including product shortages in many markets, as demand has outstripped supply.

Aurora’s results did not encompass recreational cannabis sales post-legalization, but management did provide some initial insights into how the rollout has gone.

Although not all provinces and territories were providing cannabis sales details, Aurora said the adult use market for the company has been a “success” thus far.

In Ontario, Aurora brands accounted for approximately 30 per cent of sales through the government-run Ontario Cannabis Store, while in British Columbia, Aurora had the four best-selling dried flower products, according to Bloomberg.

Alcanna Inc., which operates five Nova Cannabis stores in Alberta and in which Aurora has a 25 per cent stake, saw $3.7 million in sales during the first 19 days, Battley said on Monday.

Aurora noted the revenue for its latest quarter included about $600,000 from its initial shipments received by provinces in the final days of September ahead of the legalization.

The company added that during the three months ending Sept. 30 and subsequently, the company has made “significant progress towards increasing its production capacity, including receipt of various sales and production licenses.” The Canadian government has said it would expand legalized marijuana to include edibles and concentrates like vape pens within a year.

Justin Trudeau’s Liberal government will probably act sooner, before next year’s federal election, Battley said.