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The Canadian company Aurora Cannabis Inc. tripled its sales thanks to the increase in weed sales in the last quarter of its fiscal year, but the producer's profit gains were mainly attributable to a different activity: investing in other marijuana companies.
Cannabis stocks in Canada have skyrocketed in recent times as the country prepares to fully legalize the drug for adult recreational use on October 17. Aurora
ACBFF, + 3.65%
CBA + 4.07%
similar frameworks to competitors like Canopy Growth Corp.
GSC + 0.46%
CANNABIS, + 0.44%
and Cronos Group Inc.
CRON, -3.29%
CRON, -1.76%
, said after publishing results Monday night, that the company is ready for a sharp rise in sales.
"In about three weeks, a significant increase in demand will initially come from the Canadian market for legal consumption," Aurora CEO Cameron Battley said at a conference call Tuesday morning. "We have established inventories for this market and have entered into supply agreements with almost every province and territory in Canada to provide a broad range of dried and higher-margin flower products, such as pre-rolls, oils and capsules.
Aurora also seems ready for recreational legalization, mainly by becoming the Berkshire Hathaway of cannabis. Aurora has invested heavily in other weed control businesses and said on Tuesday that as of September 21, the company's total investment in public companies was more than $ 700 million Canadian.
The strong growth in pot stocks has fueled Aurora's profit. The company posted a profit of C $ 79.9 million, up from losses of C $ 4.8 million recorded in the same period last year. The gross margin, a position in the financial statements that measures the amount that a company earns before many costs are taken into account, was much lower at $ 20.6 million Canadian, but still high of 5 , 8 million Canadian dollars.
"L & # 39; increase [in net income] was mainly due to the unrealized unrealized gain on derivatives and marketable securities, "Aurora said in its statement, crediting earnings to increases in the value of its investments.
An example of Aurora's bets on the sector includes its stake in Green Organic Dutchman Holdings Ltd.
tgod, -2.55%
TGODF, -3.86%
– a bet that the company made earlier this year and made Aurora very rich, on paper.
Aurora said in January that it had invested C $ 55 million in Dutchman, buying 33 million shares for C $ 1.65 per share. Dutchman closed at 8.25 Canadian dollars on Monday, valuing Aurora's stake at about 270 million Canadian dollars. Aurora said in its press release that it owned about 17% of Dutchman and had options to increase that stake to more than 50%.
See also: For Canadian marijuana investors, coming to the United States is a "crapshoot" that can end with a lifetime ban
Other public companies in which Aurora has invested include Hempco Food and Fiber Inc.
HMPPF, + 0.64%
HEMP, + 8.02%
, CTT Pharmaceuticals Inc.
CTTH, -0.99%
and Choom Holdings Inc.
CHOOF, -3.25%
Aurora also revealed the purchase of 20% from a private company, Capcium Inc., which supplies equipment to Aurora for the manufacture of pills for the drug market.
Aurora uses these investments to build partnerships that could be useful when cannabis becomes legal. For example, Mr. Battley said on Tuesday that the investment in Alcanna, a private chain of liquor stores in Canada, includes the creation of an "Aurora brand cannabis chain" in Alberta.
"Beyond simply selling at a reduced price, Aurora has established a strong presence in all aspects of the cannabis industry's value chain," said Battley on Tuesday. "This includes research on plant genetics and industry, design, extraction and formulation of facilities throughout the consumer engagement and point of sale."
Aurora is also very competitive, as the company has listed six complete acquisitions completed or agreed since the end of the fiscal year on June 30. These included the massive $ 2.5 billion announced in May for MedReleaf, ICC Labs Inc. and purchases from Hothouse Consulting Inc., Anandia Laboratories Inc., Agropro UAB and Borela UAB.
Read: Do you want to invest in cannabis companies? Watch out for rogue players
Battley said that if MedReleaf had been part of the company in the quarter that was reported, revenues would have been C $ 33.1 million, more than 60% more than Aurora's total sales. The acquisition was concluded at the end of July.
Aurora hopes to make its own shares more investable for Americans with a listing in a "senior" US market, the company confirmed on Monday, but the executives did not specify which one. Rival Tilray Inc.
TLRY, + 8.42%
became public on the Nasdaq; Cronos and Canopy are listed in the United States.
The Aurora stock gained 4.1% on Tuesday to close at $ 12.77 on the Toronto Stock Exchange, where it is traded. Aurora also has a list of United States on pink leaves. Shares listed on the Aurora Stock Exchange in Canada have gained 34.5% so far this year, while the Horizons Marijuana Life Sciences Index Exchange Traded Fund
HMMJ, -0.84%
gained 16.2% and the S & P 500 index
SPX, -0.13%
increased by 9.2%.
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