Many cannabis companies have reported smaller sales than expected, and the market is trading down in the light of several mishaps this week.
Cannabis companies in Canada have released their quarterly financial reports, and by the looks of it – things are not going great for some of them.
The stocks of many cannabis companies have been going down this week. Some industry insiders are attributing this to the general downturn of the market affected by the trade war between the U.S. and China.
Industry experts have also pointed out that the supply problems are constantly obstructing the growth of the cannabis market.
CannTrust trades up
As we’ve said before, most of the market was trading down compared to yesterday and most of last week. However, Canada’s CannTrust stood out in the crowd of poor earnings reports.
According to the Financial Post, The Royal Bank of Canada analyst Douglas Miehm wrote:
“We believe supply constraints continue to hold back financial results for the industry as a whole, but even more so for CannTrust given the popularity of the company’s products in the recreational market.”
However, it may or may not shock you that about 67% of net revenues came from the medical users and just 33% from the recreational users.
CannTrust reportedly sold 3,407 kilograms of dried cannabis equivalents in the past three months, and the average selling price per gram increased from $4.54 to $5.47.
The company’s stock is currently trading at around $8.21 CAD, and it crossed into the $8.5 range a couple of times yesterday.
Aurora flops the quarter
One of the biggest producers in Canada, Aurora Cannabis, has yet again had a rather disappointing quarter, according to the earnings the company reported.
Aurora reported that the cost per gram dropped from $1.92 to $1.42, and the selling price per gram dropped from $6.80 to $6.40.
It was also one of the most heavily traded companies on TSX yesterday, with over 6 million shares being sold or bought during the day. CannTrust was also highly traded with about 5 million shares.
“We achieved solid revenue growth and strong operating results in a quarter proven challenging across the industry. We are laser focused on building a long-term sustainable business,” said CEO Terry Booth.
The company reported a production capacity of 15,590 kilograms, and net sales of $65.1 million CAD, while the industry analysts expected net sales of at least $68.7 million CAD.
They also reported a net loss of 160.2 million CAD, which is marginally smaller than those in the previous quarter.
Cronos posts another bad quarter
Alongside with the company financial results and business highlights for Q1 in 2019, the Cronos Group also announced that the company is on track and that the quarterly results are within expectations.
As a reminder, the company operates two wholly-owned licensed producers in Canada – Peace Naturals Project Inc. and Original BC Ltd, the first one being a global health and wellness platform, while the other one is an adult-use brand.
CEO Mike Gorenstein said:
“In the first quarter of 2019, the business performed in line with our expectations. We continue to stay laser-focused on our strategy of building our supply chain, distribution, intellectual property and brand portfolios.”
As far as numbers go, that’s where things start going south for the Toronto-based company. However, this underperformance is currently being covered by two major one-time benefits.
One of the two was the near-20% stake Cronos had in Whistler Medical Marijuana, a company that was recently bought by their rival, Aurora Cannabis.
Cronos eventually sold all these shares of Aurora, netting the company a near 9x return on its initial investment into Whistler Medical.
The second major benefit was the $436.4 million non-cash unrealized gain on the revaluation of derivative liabilities. According to the Motley Fool, they pertain to Altria’s anti-dilution rights as a 45% equity stakeholder.
In essence, due to a clause in the agreement, the stock is not being as diluted as it should be.
Cronos is truly behind its competition. The company has supply deals with only five provinces in place, which means it should be able to focus on foreign markets, but that’s not really happening at the moment either.
Even with the huge investment from Altria, Cronos isn’t looking like a top tier cannabis producer.