SNDL Inc. has reported record 2022 revenue after it acquired Alcanna - but a wider full-year loss after it took a big impairment charge due to negative share price movements.
Canada’s largest private sector liquor and cannabis retailer grew revenue by 1,170% to $712 million for the year to December 31, 2022. Sequential growth in its Liquor Retail, Cannabis Retail and Cannabis Operations segments helped lift fourth-quarter earnings by 4% to $240 million, it added.
Its full-year net loss widened to $372 million from $227 million in the previous year as non-cash inventory and asset impairments increased to $203 million from $77 million in 2021.
SNDL attributed the net loss largely to fourth-quarter non-cash charges, including the impairment of goodwill related to the March 2022 acquisition of Alcanna and its majority-owned subsidiary Nova Cannabis. Despite improving fundamentals for Nova, SNDL said a 53% decline in its share price since the acquisition date warranted a $88 million non-cash adjustment.
"2022 was another transformational year for SNDL. We increased the sustainability of our business model by achieving record-breaking revenue and gross margin as well as positive and increasing cash provided from operating activities in our two most recent quarters," SNDL CEO Zach George said in the company's earnings statement.
”Our vertical integration strategy is beginning to show its intended results, and we are working to gain stability in a challenging and dynamic industry.”
George noted SNDL’s January 2023 acquisition of The Valens Company (TSX:VLNS, OTCQX:VLNCF), which he said: “provides midstream capabilities in every material cannabis product category and the ability to selectively balance higher cost cultivation costs while taking advantage of the current massive oversupply in Canadian markets.”
SNDL now expects to materially outperform its previous savings and is on track to realize more than $20 million in cost synergies, he added.
“Our drive to create exceptional consumer products and experiences is key to SNDL's momentum and future success,” said George. “We continue to see positive results across all of our key operating segments and remain committed to our goal of becoming free cash flow positive.”
SNDL's shares were 1.4% down by mid-morning on Monday.
Contact the author at stephen.gunnion@proactiveinvestors.com