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Aurora Cannabis Inc. on Thursday reported a bigger quarterly loss and lower sales than expected. But the Canadian pot producer stuck with its target of hitting an adjusted measure of profit by the end of next month, and said it would get there, in part, through a company that has little to do with cannabis.
Chief Executive Miguel Martin, during Aurora’s
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earnings call, said the company was “very close” to hitting that target — for adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization. The figure is the cannabis industry’s preferred, and much more forgiving, profit metric.
But profit expectations for Canada’s weed industry have had to be tempered and pushed back over the past few years. And Aurora, like the rest of the industry, has struggled with overproduction, debt, layoffs, impairments, facility closures and, more recently, inflation and its impact on costs and demand. Still, Chief Financial Officer Glen Ibbott said Aurora could hit that profit goal through cost management, steady gross margins, and a sorting-out of distribution hurdles that would help revive sales.
He also said the company would get there through Bevo Farms — a vegetable grower that Aurora acquired a controlling stake in over the summer.
Bevo contributed only around C$3.3 million in net sales to Aurora’s fiscal first-quarter results. But with cannabis-industry competition stiff and rising prices for essentials still hurting consumers, other Canadian cannabis producers have leaned on their non-cannabis segments for growth. Tilray Brands Inc.
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this week said it acquired the Montauk Brewing Co., a craft brewer in New York. Some analysts said Canopy Growth Corp.’s
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sports drink business, BioSteel, helped drive sales for its most recent quarterly results, reported this week.
Aurora reported its own results and issued its forecast as competition in Canada’s recreational weed industry pushes prices lower, and as pain from rising prices and an energy crisis becomes more acute in Europe — where Aurora executives have talked up the potential in the region’s nascent medical markets.
Aurora reported a fiscal first-quarter net loss of C$51.9 million, compared with C$11.9 million in the same quarter last year and a far bigger C$618.8 million loss in the prior quarter. Aurora lost 17 Canadian cents per share during the quarter, according to a filing.
Total revenue came in at C$49.3 million, down slightly from the prior sequential quarter and down from C$60.1 million in the prior-year quarter.
Analysts polled by FactSet expected Aurora to lose C$33.7 million in the quarter, or 13 Canadian cents a share, on sales of C$52.6 million. The company said it finished the quarter with around C$393 million in cash.
Shares fell 3% after hours.
Aurora has leaned into its medical cannabis business, which includes Canada and a handful of markets in Europe as well as in Australia, as the recreational market gets more crowded. Medical cannabis sales fell 23% from a year earlier to C$31.6 million in Thursday’s report. That figure was also down 14% from the prior quarter due to “timing of shipments into certain international markets during the prior quarter,” executives said.
Recreational cannabis sales, meanwhile, were C$13.7 million. That marked a 9% gain from the previous quarter, but a 28% drop from the same period last year.
The acquisition of Thrive Cannabis helped those sales, Aurora executives said. But they noted a cyberattack at the online Ontario Cannabis Store, along with store closures due to a strike in British Columbia, acted as a counterweight. They also said the decrease from the prior year “was attributable to a reduction in the volumes sold of discount, low-margin brands, and replaced with premium higher-margin brands.”
In October, Aurora repurchased C$31.3 million in convertible debt for C$29.8 million in an effort to slim down its debt. Aurora had roughly C$380 million of cash at that time.
In September, executives reported an increase in Aurora’s recreational weed sales for its fiscal fourth quarter, helped as well by the Thrive acquisition. However, shares took a hit at that time, after Aurora booked another impairment charge, of C$505.1 million, or US$377.8 million, putting its net loss for its fourth quarter at C$618.8 million. The impairment, management said, was “triggered by changes in cannabis market conditions, and in the current capital market environment including higher rates of borrowing and lower foreign exchange rates.”
Aurora Cannabis stock has tumbled 76% this year, compared with a 17% drop for the S&P 500 index
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