CannTrust shares slip after pot firm posts loss despite record revenue
‘We’re very optimistic for the future’
CannTrust Holdings Inc.’s stock plunged more than 18 per cent on Thursday after it posted record fourth-quarter revenues — fuelled by the legalization of recreational cannabis last fall — but swung to a net loss and fell short of analyst expectations.
Peter Aceto, chief executive of the Vaughan, Ont.-based company, said despite the market reaction, CannTrust is “right on the mark,” with strong business fundamentals and products that are “resonating” with customers.
“Yes, we have areas for improvement. We’re investing in the business,” Aceto said in an interview.
“And so, at the end of the day, we think we need to continue to focus on the things that we’re really good at.
“And I think the markets will recognize that... We’re very optimistic for the future.”
In its first quarter to capture post-legalization recreational sales, CannTrust reported record net revenue of $16.2 million for the three-month period ended Dec. 31, up from nearly $7 million a year earlier.
The increase in revenue came as it posted a fourth-quarter net loss of $25.5 million or 26 cents per share, compared with a $6.3 million profit or eight cents per share during the same quarter in 2017.
Analysts had expected revenues of $21.2 million, and a net loss of $6.4 million amounting to a four cent loss per share, according to those surveyed by Thomson Reuters Eikon.
CannTrust said its operating expenses rose during the quarter due, in part, to higher marketing costs to launch its recreational brands, personnel hires and costs related to its listing on the New York Stock Exchange.
For the full year, CannTrust reported net revenue of $45.6 million and a net loss of $13.6 million, compared with net revenue of $20.7 million and net income of $6.9 million in 2017.
The company said it expected to continue to make investments in people, process, technology and marketing and the development of edibles, which are expected to be legalized in the coming months.
That includes preparations to produce next-generation pot products such as vape pens and BrewBudz, pot-infused coffee pods.
“CannTrust’s investments into people, process, technology and marketing are expected to impact near-term profitability as the Company continues to scale,” the company said in a statement.
“These are calculated investments that the company expects will result in increasing yields, lower cost per gram and the advance of the company’s brand and strategic initiatives.”
Still, CannTrust’s stock fell after the release of its latest earnings.
On the Toronto Stock Exchange, CannTrust shares closed down 18.96 per cent to $10.90.
Shares of cannabis companies were already lower in the aftermath of analyst downgrades of Cronos Group Inc., which reported its fourth quarter earnings on Tuesday.
Like CannTrust, the Toronto-based licensed producer reported an uptick in fourth-quarter revenue but a quarterly net loss and higher operating expenses, falling short of analysts’ expectations.
Cannabis companies had ramped up production in the lead up to legalization on Oct. 17, but both government and private retailers continue to face a supply shortage across the country.