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Organigram Holdings Inc. said on Monday that growing marijuana was costing it nearly 50 percent more in cash and hurting its earnings in the last quarter because the cannabis company had tried – and failed – to develop a culture technique. more efficient.
Cash costs and all-in farming costs increased to CAD 0.95 and CAD 1.29 per gram of dried flower, compared to CAD 0.65 and CAD 0.95 per gram in the previous quarter. Costs have resulted from attempts to develop an alternative technique for planting fresh cannabis, working with some strains of cannabis but not functioning on a large scale, Organigram
OGI + 4.63%
OGI + 4.21%
General Manager, Greg Engel, told MarketWatch during a phone interview.
Some marijuana growers grow pots by cutting bits of an already growing plant and using this organic material instead of a seed for a new plan called "cloning". The trimmings are usually taken from so-called mother plants to ensure genetic consistency. In Moncton, New Brunswick, a company has attempted to use organic materials from plants earlier in life.
"We did an experiment in which we took the early flowers, which you will cut off the lower leaves anyway, and that you use them to clone them," Engel said. "At the beginning of the experiment, we had very positive results, and then we moved to a larger group, which was variable in terms of strains and inconsistent results. This had a significant impact on performance.
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Engel says that Organigram staff discovered that the new size method from plants was not working as expected after a few weeks, but that the return to the previous method took several weeks. After four to six weeks, a significant number of the company's growing rooms were affected.
Many cannabis growers have already tried the same experience as Organigram with similar results, according to several sources, in California's famous pot-growing region, the Emerald Triangle. According to these pot producers, it is possible with some types of pots but not others, and much more difficult than other planting techniques.
While this experience has been scaled up and has affected the company's product more than other tests, Engel said that Organigram is constantly striving to innovate and improve its growth activities. For example, society understood that if it reduced the number of plants per room, it could actually increase the yield of space.
"This one interested us for two reasons," said Engel. "This would allow us to not have to grow these vegetative plants a little longer, in order to free up space. And this would make the process of cutting blooming plants more efficient because you will be using this material. It was a kind of double efficiency. "
Engel explains that because of the way society organizes and produces cannabis, it is not efficient to use the experimental technique on only a few plants.
A guide to pot stocks: What you need to know to invest in cannabis companies
Organigram, the first major Canadian cannabis company to report its profits this season, could be a key element for the rest of the Canadian cannabis industry, giving investors clues as to what to expect with larger competitors, such as Aurora. Cannabis Inc.
CBA + 3.55%
CBA + 3.63%
and Canopy Growth Corp.
GSC + 2.81%
CANNABIS, + 2.78%
The company recorded a net loss of C $ 10.2 million ($ 7.8 million), or 7 cents per share, after earnings of C $ 2.8 million, or 3 cents per share, over the course of the year. from the same period of the previous fiscal year. Gross revenues increased ninefold to $ 30.4 million, while net revenues excluding excise taxes were $ 24.75 million ($ 19.0 million), compared to $ 3 million in the previous year. , $ 4 million Canadian.
The FactSet consensus forecast a profit of 3 cents and an income of 29.7 million Canadian dollars. The third quarter of the organization chart ended May 31st.
See also: Cannabis companies say that they grow enough pot, they just can not deliver it
During the quarter, the company's gross tonnage of pot decreased sequentially, from 4.99 tonnes to 4.6 tonnes, as Ontario acquired a large amount of cannabis to ensure that it would be enough. of cannabis for sale to the top 25 retailers, according to Engel. A source familiar with retail shopping said that stores that did not buy the 100 kilograms initially available had a hard time making sure there were enough products and some were closing several days a week.
"There was this big filling, and after that, they put this cap in. Beyond the initial initial order of 100 kilograms, the stores were allowed to buy 25 kilograms per week," said Engel. "It's a way of staging things, but there are a few products out there, like our Trailblazer brand."
Shares traded in the United States of Organigram Holdings closed up 4.6% on Monday. The stock has yielded 8.3% in the last three months until Friday, while the ETFMG Alternative Harvest ETF
MJ + 1.87%
slipped 13.1% and the S & P 500
SPX, + 0.02%
gained 3.7%.
Additional report by Tomi Kilgore.
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