It was a grim day for Canadian marijuana producer Aurora Cannabis last Friday.
The stock had its worst trading day in over five years with analysts remarking that “it would be fair for investors not to believe them.”
The company reported first quarter 2020 financial results that revealed that revenue declined by 24% sequentially. The second largest public weed company by sales also cancelled or delayed plans for multiple further facilities expansions and converted C$155 million in debt into shares as it seeks to conserve cash.
Shares fell 17.2% as Wall Street reacted to the news.
Chief Corporate Officer Cam Battley stated on the earnings call, “This quarter, all the bad news is in the top left-hand corner, and that is that our Canadian consumer cannabis revenues are down 33%, obviously not the number we were hoping for, however, if you take a look at the other eight key performance indicators that we’ve been tracking now for three quarters, they’re all green, they’re all positive. Our Canadian medical revenue is up, our international revenue is up, our cash cost to produce is actually down 25%, we’ve moved under CAD1 and we came in at CAD0.85 per gram the cash cost to produce. Our average net selling price per gram is up 7%. Our gross margin — our industry-leading gross margin remained stable at 58%, which is head and shoulders above our peers.”
He added, “Our kilograms produced were up 43%, and even our SG&A, which we promised that we would control as part of our path to profitability, is actually down 3%, including the impact of a one-time out-of-period adjustment. And then finally, our number of active registered patients is up 8% to a record of 91,000.”
He further said, “Now I’d like to briefly address the current state of the market. The past few months have been challenging for the broader cannabis industry. Between issues of governance, evolving consumer demand and provincial retail bottlenecks, there has been no shortage of negative news .That said, I want to reiterate that our view of the opportunity in the Canadian and global cannabis industry is still extremely robust. It’s important to remind ourselves that the Canadian consumer market is just over a year old. These issues will take a little time to resolve. But in the end, we’ll be a stronger business because of it.”
Disclaimer: We have no position in Aurora Cannabis Inc. (NYSE: ACB) and have not been compensated for this article.