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A few days after Canada's legalization of recreational marijuana use by adults, Canada's largest pot producers shipped less than 1% of the pot that the government planned to spend on cannabis in the quarter.
In the midst of a wave of results this week, the most notable results are the relative lack of profits, if not revenue, from Canadian potty sales for a period that has ended less than three weeks before the public was able to buy. With Statistics Canada estimating that sales reached C $ 1 billion in the first quarter, five major producers reported recreational sales totaling C $ 1.7 million, and none of them provided forecasts. revenue for the launch quarter.
"The forecast ahead of the quarterly announcement was for the first major deliveries at the end of September, starting October 17," said Jason Zandberg, an analyst at PI Financial. "It was very disappointing to see. A large number of companies did not reveal sales of their hobbies during the quarter. If this is not an important number, you do not want to emphasize it. "
For leaders of Canada's largest licensed marijuana growers, who have been touting the potential of recreational grass for years and their ability to capitalize on it, this slow start will leave doubt about the growth of their market capitalization. Notable supply problems in sales across Canada and lack of fast revenues have pushed managers to point fingers at government and retail systems, but many are still struggling to develop their own operations .
A guide to pot stocks: What you need to know to invest in cannabis companies
Canopy Growth Corp. general manager Bruce Linton blamed provincial buyers for poor sales. He said that none of the provinces had placed large orders, preferring to make smaller purchases to test its supply infrastructure. Canopy said it had had to destroy a number of potted crops during the September quarter because of delays in obtaining Health Canada's processing licenses and the slow pace of construction. 39 infrastructure, but that in a written declaration it was not a material loss.
Pete Young, the master farmer of Indiva Inc., said that crop failures of this magnitude are likely the result of rapid expansion and inadequate infrastructure or knowledge for accompany them. "This is not enough to manage their expansion," he said. "We want to see the quality of the product, we want to see how good the product is."
Several producers, including Tilray Inc. and CannTrust Holdings Inc., have reported experiencing production delays related to the application of federal excise tax stamps on pot packaging. According to Tilray's CEO, Brendan Kennedy, there is only one company in Canada that can properly apply stamp glue.
Provinces and a private retailer proposed a different assessment of supply issues. James Burns, General Manager of Alcanna Inc.
CLIQ, + 2.64%
managing a chain of retail outlets in Alberta, told MarketWatch last month that its stores received about 40% of the pot they ordered. Alcanna reported C $ 3.7 million in revenue from its five stores during the first 19 days of legalization. Burns said that Alcanna had refused to reveal the producer, but that one of the big names had organized a "collage party" the weekend prior to Oct. 17 to apply stamps to the packages.
Buyers of the Nova Scotia government-run cannabis store also reported receiving about 40% of the product ordered. The Ontario Cannabis Store, which is the only way for Canadians in the country's most populous province to buy pot, has blamed delivery companies for cannabis production delays, telling customers that the products were not labeled correctly.
Low deliveries of recreational weeds were not the result of weak demand, as major producers – and provincial governments in the country – said consumers wanted more products. Provincial cookware websites have missed many products and traditional private retailers are in desperate need of more inventory. In Quebec, government-run stores have closed three days a week indefinitely, or they could keep enough marijuana on their shelves.
Do not miss: CannTrust positions itself as a major Canadian producer of weeds, the stock explodes higher
Although the provinces are essentially buying cannabis from any authorized producer with sufficient capacity, Camravy Chief Executive Officer Cam Battley said the company was not yet able to move there. where other companies had not delivered. At the end of the quarter, Aurora's production was close to 5,000 kilograms, four times higher than it was a year ago. However, Aurora's medical patients in Canada and Europe needed approximately 2,700 kilograms.
"Do not forget that the medical market and the European market bring us more dough, that's all," said Terry Booth, CEO of Aurora, during the teleconference.
Tilray's Kennedy said the company "aggressively increased its capacity" for recreational cannabis. But until early November, one of the company's largest facilities did not obtain the required federal licenses for its entire growing area, which limited its production.
"The slow start-up and deployment of adult use across the country has been influenced by many factors, including the timing of licensing, the distribution of retail infrastructure," he said. said Tilray's chief financial officer, Mark Castaneda. "We are not immune to these factors and they will affect our results."
The lengthy federal licensing process with Health Canada has also caused headaches for cannabis-producing companies outside Tilray.
Peter Aceto, CEO of CannTrust, said the provincial buyers were asking for a product as early as "very early" and had spoken with all the major licensed producers to request replenishment as soon as possible. For government-ordered products, it is not clear that buyers are making the right choices, other than shortages – in some cases, stores were left with products that largely met the demand because they were not as desirable as those sold quickly.
"So I think [provinces] had a view that, [they] had not received delivery of all the product they hoped for and, believing that for what they possessed, the demand would be stronger, "said Aceto.
How many pots each company has shipped
canopy
CANNABIS, -0.26%
GSC -0.34%
reported selling approximately $ 700,000 worth of recreational pot. Its leaders accounted for 30% of the products available to Canadian consumers, focusing on provinces where there are physical stores open to the public – which excludes Ontario.
"… It's not our top priority to have the most products and reach Ontario," said Linton. "I think that physical stores like Alberta, Quebec, of course, and New Brunswick, Newfoundland, were where we pushed as hard as we could."
Dawn
CBA -3.61%
CBA -4.11%
stated that its market share was 30% for Ontario, but total revenue from the recreational pot was C $ 500,000 for the quarter. The Ontario Cannabis Store declined to confirm this figure and Aurora executives said its products were also popular in British Columbia and Prince Edward Island.
Cronos
CRON, -0.35%
CRON, -0.61%
That turnover amounted to C $ 3.76 million for the quarter and this honeymoon was a "major part" of the quarter, but the company declined to specify an exact figure at the end of the quarter. request from MarkeWatch. During a conference call, Michael Gorenstein, CEO of Cronos, said that the company considered the month of October as a "difficult month" and that it was ensuring that its chain of custody and control was in place. supply gets "smooth".
CannTrust
CNTTF, -10.54%
TRST, -11.60%
posted a small profit in the middle of the red ink sea of other producers. Like Aurora, CannTrust delivered $ 500,000 worth of recreational products for the quarter.
Supreme Cannabis Company Inc.
SPRWF, -2.26%
FIRE, -3.95%
who also announced results this week has sold no recreational pot, nor Tilray Inc.
TLRY, + 2.99%
or Green Organic Dutchman Holdings Ltd.
tgod, -4.51%
TGODF, -4.89%
Tilray is the most valuable pot company in terms of market capitalization and investors attach significantly higher value to Dutchman than CannTrust.
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