Aurora rev­enue dips on prod­uct re­turns, lower cannabis prices

Montreal Gazette - - FINANCIAL POST - VANMALA SUBRA­MA­NIAM

Aurora Cannabis Inc. re­ported de­clin­ing cannabis rev­enues for the quar­ter ended Dec. 31, pri­mar­ily due to re­turned prod­ucts and lower per gram pot prices — two trends that have plagued the in­dus­try over the past few quar­ters.

Aurora’s net cannabis rev­enue in the sec­ond fis­cal quar­ter of 2020 was $63.2 mil­lion, com­pared to $70.8 mil­lion in the quar­ter prior. The com­pany in­curred a $10.6-mil­lion pro­vi­sion for “re­turns and price ad­just­ments” on last quar­ter’s sales, bring­ing con­sumer cannabis rev­enues down by 24 per cent, to just $22.9 mil­lion.

Aurora saw a 10-per-cent re­duc­tion in its per gram pot price, which was $4.76 this quar­ter, as com­pared to $5.28 in the pre­vi­ous quar­ter.

Gross mar­gins on net cannabis rev­enue fell from 67 per cent last quar­ter, to 55 per cent this quar­ter, as con­sumers ad­justed their prod­uct pref­er­ences and cannabis in­ven­tory lev­els re­main el­e­vated.

The Ed­mon­ton-based li­censed pro­ducer also saw its global med­i­cal rev­enue plunge from $5 mil­lion to just $1.8 mil­lion due to a tem­po­rary sales in­ter­rup­tion in Ger­many, its big­gest in­ter­na­tional mar­ket.

Last week, Aurora an­nounced sweep­ing changes to its work­force, lay­ing off 500 full-time em­ploy­ees amid the res­ig­na­tion of long­time CEO and com­pany founder Terry Booth. The com­pany has been in a pre­car­i­ous cash sit­u­a­tion for months, due to fall­ing rev­enues and a high cash burn-rate from hav­ing to main­tain its sprawl­ing cannabis fa­cil­i­ties — in­clud­ing one in Den­mark that was re­cently shut down.

The Ed­mon­ton-based li­censed pro­ducer was forced to write down close to $1 bil­lion in as­sets and good­will pro­vi­sions in the last quar­ter, re­lated pre­dom­i­nantly to its South Amer­i­can and Dan­ish op­er­a­tions.

But Aurora Cannabis Inc.’s in­terim CEO Michael Singer be­lieves the com­pany’s de­ci­sion to spend hun­dreds of mil­lions of dol­lars on in­ter­na­tional ex­pan­sion into Europe and South Amer­ica was “not a mis­take” be­cause it “made sense at the time,” given the ease in which cap­i­tal could be raised in the cannabis in­dus­try. “Our long-term view has not changed, it’s just that the path to get there is very dif­fer­ent,” Singer told the Fi­nan­cial Post.

The com­pany still be­lieves in the global cannabis op­por­tu­nity but has no plans in the near fu­ture to rein­vest in its in­ter­na­tional busi­nesses. “We have made no de­ci­sions to sell the Dan­ish fa­cil­ity, but we have parked that as­set tem­po­rar­ily,” Singer said.

The com­pany’s rev­enue de­rived from sales to other li­censed pro­duc­ers plunged roughly 80 per cent, from $10.3 mil­lion last quar­ter to just $2.4 mil­lion this quar­ter, as an in­creas­ing num­ber of li­censed pro­duc­ers shore up their own sup­ply and cease pur­chas­ing from big­ger grow­ers such as Aurora amid stag­nant con­sumer de­mand.

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