Canopy Growth Corporation (TSX:WEED, NYSE:CGC) has announced a suite of cost-cutting measures across its Canadian business, including a reduction in its headcount by approximately 60% or 800 jobs and the closure of its 1 Hershey Drive facility in Smiths Falls, Ontario.
In a statement accompanying its third quarter fiscal 2023 financial results, Canopy Growth said it was transitioning to an asset-light model in Canada by exiting cannabis flower cultivation at the Smiths Falls facility, ceasing the sourcing of cannabis flower from the Mirabel, Quebec facility, and moving to a third-party sourcing model for cannabis beverages, edibles, vapes, and extracts.
The company noted that these changes come in addition to multiple cost reduction activities within the 2023 fiscal year, including the divestiture of its Canadian retail operations, the organizational restructuring of certain corporate functions, and the closure of the Scarborough, Ontario research facility.
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Canopy Growth said it expects these cost reduction initiatives will reduce its annual cost of goods sold and its selling, general, and administrative expenses by a combined C$140 million to C$160 million over the next 12 months.
“These changes are difficult but necessary to drive our business to profitability and growth,” Canopy Growth CEO David Klein commented.
“Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership.”
The company continues to progress its US strategy through Canopy USA LLC and is committed to remaining dual-listed on the TSX and the Nasdaq, the company noted.
Net loss increases
Canopy Growth’s shares plunged 16% with the release of its Canadian business update and latest quarterly earnings which disappointed on the top and bottom line.
For the three months ended December 31, 2022, Canopy Growth reported a 28% dip in net revenue to C$101.2 million, down from revenue of C$141 million in the year-ago quarter.
The company attributed this decrease to increased competition in the Canadian adult-use cannabis market, the divestiture of C3 Cannabinoid Compound Company GmbH, a decline in its US CBD business, and softer performance from its Storz & Bickel and This Work segments.
The company’s net loss grew to $267 million or C$0.54 per diluted share, up by $151 million or 133% from a loss of C$115.5 million in the same quarter in the previous fiscal year.
The company said this was driven primarily by non-cash fair value changes and an increase in asset impairment and restructuring costs.
Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss was C$88 million, up about $21 million from an EBITDA loss of $67 million in the year-ago quarter.
Canopy Growth CFO Judy Hong commented: “Canopy is firmly on the path to deliver at least quarterly breakeven adjusted EBITDA in our Canadian cannabis business in fiscal 2024, even at current revenue run-rate.”
Canopy Growth’s Canadian-listed shares were down 16% at C$3.08, while its Nasdaq-listed shares fell 16.4% at US$2.29 on Thursday afternoon.
Contact the author at emily.jarvie@proactiveinvestors.com
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