Cannabis giant Canopy cites ‘headwinds’ for poor sales, higher costs
Canopy Growth Corp. said weak quarterly earnings for the period ending March 31, 2019 were primarily due to challenges scaling up at its largest greenhouse facilities in British Columbia and Quebec — roadblocks that cost the company $24 million in operating expenses for facilities “not yet cultivating, cultivating but not yet harvesting, or facilities that had underutilized capacity.”
Canopy’s stock plunged almost eight per cent within an hour of Friday morning trading.
Between Jan. 1 and the end of March this year, Canopy sold 9,326 kilograms of pot to domestic and global markets, roughly 800 kilograms less than what it sold the previous quarter, which reflected just 10 weeks of post-legalization recreational sales.
It made $82.3 million in gross revenue from pot sales, with $68.9 million coming from the recreational market, a slight decline from $71.6 million in the previous quarter. Canopy brought in $94.1 million in net revenue in its fourth fiscal quarter, up slightly from the previous three months.
“When you’re retrofitting greenhouses, if you get a heavy snow load, you have to get the heat cranked up, for instance. It’s a challenge ...,” said Mike Lee, acting chief financial officer told analysts Friday morning. “There’s nothing systemic to be concerned about.”
The company says that despite “headwinds” it faced over the last year related to ramping up, it expects its harvest capacity to increase to approximately 34,000 kilograms in Q1 fiscal 2020. “We were experiencing headwinds, and it takes time to claw your way back,” said CEO Bruce Linton in response to a question about what led to higher operating expenses this quarter.
The biggest revenue hit by percentage came from a slump in sales on the medical market, which Linton attributed to supply issues. In fiscal Q4 2018, medical revenue was $21.9 million versus just $13.4 million a year later.