Aphria down $108.2M despite 600% revenue growth
Ontario-based firm says losses due to expansion costs as it boosts its capacity Aphria reported increased packaging and distribution costs market following legalization last October.
Aphria Inc.’s first full quarter of sales since the legalization of recreational cannabis fell short of investor expectations after the company posted a steep quarterly loss, a $50-million impairment charge related to its Latin America operations and announced that Green Growth Brands had dropped its hostile takeover offer.
Although the Leamington, Ont.-based pot producer saw net revenue soar by more than 600 per cent to $73.8 million during its third quarter ended Feb. 28, it posted a net loss of $108.2 million.
That’s compared with net revenues of $10.3 million and net profits of $12.9 million during the same period a year earlier.
As well, Aphria during the three month-period brought in $7.19-million in non-medical marijuana revenue, down 34.9 per cent from $11.03 million during the previous quarter which only encompassed a month-and-a-half of adult-use sales.
The cannabis producer’s stock was down as much as 15 per cent to $11.28 on the Toronto Stock Exchange on Monday morning, but had risen slightly to $11.50 by market’s close.
Aphria said the loss was largely due to an increase in general and administrative expenses as it moves to expand its capacity, as well as higher overhead costs related to supply shortages, and a “temporary increase” in packaging and distribution for the adult-use market.
Irwin Simon, Aphria’s chair of the board and interim CEO, said it is working to expand its growing capacity and streamline its processes and is embarking on a 90-day strategic plan.
“We should absolutely, getting into September, have ample product to supply the provinces,” he told analysts on a conference call. “And in regards to cost reduction, in automation, there is a significant plan in place.”
The company said its loss for the quarter amounted to 43 cents per share compared with a profit of $12.9 million or eight cents per share in the same quarter a year earlier.
That fell short of the three cents per share profit expected by analysts, according to Thomson Reuters Eikon. Despite the spike in quarterly revenues, Aphria’s latest numbers missed the $85.2 million expected by analysts.
Aphria also announced on Monday that the Ontario Securities Commission requested it perform an impairment test on its LATAM assets and the company determined it should take a $50-million non-cash impairment charge. This writedown of value comes after short-sellers alleged in December that Aphria’s acquisition of these assets in Latin America were purchased at “vastly inflated” prices, later prompting the company’s board to task a special committee to conduct its own review.
Aphria’s special committee determined that the LATAM purchase was within an acceptable range, but the company said Monday that the impairment charge was due to a reassessment of the discount rate and financial forecasts due to new financial information. The new information included lower gross margins used by the financial adviser for the special committee and recent data from the LATAM entities that showed “higher-than-expected expenses,” Aphria said.
Meanwhile, Aphria also announced on Monday a deal that will see Green Growth Brands Inc. drop its hostile takeover offer. GGB’s unsolicited takeover offer came earlier this year after Aphria was targeted by shortsellers, which sent the cannabis producer’s shares down.
Aphria rejected the all-stock bid — at1.5714 shares of GGB for each share — saying it undervalued the company. On Monday, the two companies announced transactions that will end GGB’s hostile takeover fight with Aphria.