Aurora revenue dips on product returns, lower cannabis prices
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.