Canadian marijuana company Cronos Group has reported its second quarter financial results to reveal an adjusted operating loss of $31.3 million along with $40 million worth of coronavirus-related impairment charges on its U.S. operations.
For the quarter ended June 30th, net revenue was $9.9 million, a 17.9% increase over the previous quarter.
About $2.2 million of that revenue came from the company’s U.S. operations, with the remainder coming from the “rest of world” business segment. This includes adult-use and medical sales in Canada and international interests in Australia, Colombia, Germany and Israel.
The $40 million worth of coronavirus-related impairment charges on its U.S. operations include a$35 million for Cronos’ U.S. unit and $5 million for its Lord Jones hemp-derived CBD brand. This was attributed to margin compression caused by pandemic-related measures. The charges include pay increases for production workers, discounts including free shipping and “promotional events.”
The company also reported $3.1 million of dried cannabis and extracts in the quarter, “primarily driven by cannabis product price compression in the Canadian market.”
While the company said COVID-19 did not materially affect revenue or revenue growth in its operations outside the United States, it also did not break out its Canadian recreational revenue.
“We anticipate further inventory write-downs due to pricing pressures in the marketplace,” Cronos said in a regulatory filing.
CEO Mike Gorenstein said on the earnings call, “COVID-19 has impacted markets, industries and people globally, leading to material changes in the way we live and the way we do business. We’ve also seen the profound impact our products have in our consumers’ everyday lives, and we continue to modify and monitor our distribution networks to bring quality products to market during this time. Cronos Group was founded on the mission to improve people’s life by unlocking the full potential of cannabis, and our company has always been at the forefront of providing safe access and high-quality products to patients and consumers. As you know, my focus and company’s focus are on creating long-term shareholder value by developing disruptive intellectual property and building iconic brands.”