Ex­pect pot short­age in the early days, Aphria boss warns

Windsor Star - - FINANCIAL POST - ARMINA LIGAYA

Li­censed cannabis pro­ducer Aphria Inc. warned on Fri­day of prod­uct short­ages in both stores and on­line sales por­tals when recre­ational pot is le­gal­ized in a few days.

There are “sup­ply chain is­sues abound­ing ev­ery­where with ev­ery LP,” Aphria’s chief ex­ec­u­tive Vic Neufeld told an­a­lysts. “There will not be any com­plete sat­is­fac­tion by any of the pro­vin­cial reg­u­la­tors out of the box,” he said dur­ing a call to dis­cuss the Leam­ing­ton, Ont.based com­pany’s lat­est earn­ings. “The pipe­line fill is not go­ing to be there. But that’s just the short term.”

“Sold out signs” on on­line cannabis sales por­tals across the coun­try are likely, he added. Aphria’s com­ments come just days be­fore Canada gears up to le­gal­ize recre­ational cannabis on Oct. 17, be­com­ing one of the few coun­tries around the world to have done so. Govern­ment-run and pri­vate re­tail­ers are rac­ing to pre­pare brick-and-mor­tar stores and ecom­merce por­tals for busi­ness on day one and li­censed pro­duc­ers have ramped up pro­duc­tion amid con­cerns about prod­uct short­falls, at least in the short term. Canada’s sup­ply of le­gal cannabis at cur­rent pro­duc­tion lev­els is es­ti­mated to meet just 30 to 60 per cent of to­tal de­mand, ac­cord­ing to a re­port from think-tank C.D. Howe In­sti­tute re­leased this week. The es­ti­mated de­mand across the coun­try is roughly 610.6 tonnes but the fore­casted avail­able mar­i­juana sup­ply in the fourth quar­ter of this year is just 146.13 tonnes, the au­thors said. How­ever, the au­thors note that the short­age is likely “short-lived” as more pro­duc­ers are li­censed and pro­duc­tion ca­pac­i­ties ex­pand over time.

Aphria’s short­ages are likely to be re­solved af­ter two or three months, Neufeld said. There’s a host of is­sues re­sult­ing in a sup­ply bot­tle­neck in­clud­ing de­lays in re­ceiv­ing re­quired govern­ment ex­cise stamps for its prod­ucts, and the time and man­power needed to start ap­ply­ing them to prod­ucts, said Neufeld. Aphria said dur­ing its lat­est fi­nan­cial quar­ter, ended Aug. 31, that it was “un­able to fill all of the open green­house po­si­tions due to a lack of qual­i­fied lo­cal labour, which left it with in­suf­fi­cient staff to har­vest the lev­els of pro­duc­tion pro­duced in the Aphria One green­house.”

“As a re­sult of the lower staff lev­els, one week’s crop ro­ta­tion out­grew its op­ti­mal har­vest pe­riod,” the com­pany said in its man­age­ment dis­cus­sion and anal­y­sis. Still, the com­pany’s lat­est earn­ings showed year-over-year growth in rev­enues and profit. The mar­i­juana firm earned nearly $21.2 mil­lion in its lat­est quar­ter, up from $15 mil­lion in the same quar­ter a year ago. Aphria’s profit amounted to nine cents per di­luted share com­pared with a profit of 10 cents per di­luted share in the same quar­ter last year when it had fewer shares out­stand­ing.

Vic Neufeld

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