Canopy Growth Corp. is planning further cost cutting as it works to achieve positive cash flow and profitability, the cannabis producer's new chief executive said Friday as it reported a $124.17-million loss in its third quarter of 2020.
David Klein, who formally became Canopy's CEO in January, said the Smiths Falls-based company has a "lot of work to do" but also has the financial resources to make careful choices.
Klein, who had previously been chief financial officer at Constellation Brands, Canopy's largest shareholder, told analysts that "we have to align our resources and investments with the size and growth rate of the market as it exists today."
"We've begun taking steps designed to bring our inventory in balance with our supply-demand forecast. This includes a thorough strategic review of our footprint, which is under way."
Though substantial, Canopy's loss for the three months ended Dec. 31 was smaller than analysts had expected and the company's shares were up about 15 per cent at mid-morning Friday on the Toronto Stock Exchange.
The company said it lost 35 cents per share in the quarter ending Dec. 31, compared with earnings of $74.86 million or 22 cents per share for the same quarter last year.
The loss was on revenue of $135.55 million, compared with revenue of $97.7 million for the same quarter last year.
Analysts had expected a loss of $156.78 million, or 47 cents per share, according to financial markets data firm Refinitiv.
Canada's cannabis industry has seen a wave of layoffs this year, including upwards of 500 at Aurora Cannabis and about 140 jobs at Tilray Inc., as companies struggle for profitability.
Canopy Rivers withdraws guidance
Meanwhile, Canopy Rivers says it swung to a loss in its third quarter of 2020 and has withdrawn its full-year guidance over multiple headwinds in the cannabis industry.
The venture capital arm of Canopy Growth says it had a net loss of $10.1 million, or five cents per share, for the three months ending Dec. 31, compared with a net income of $5.7 million, or four cents per share, a year earlier.
Analysts had expected a net loss of two cents per share, according to financial markets data firm Refinitiv.
Canopy Rivers says it has withdrawn its full year guidance because uncertainty created in the industry from unanticipated licensing delays, “reformed views” on the ramp-up time for large-scale cannabis greenhouses, and a general decline in wholesale cannabis prices.
The firm, which holds investments in numerous cannabis firms, had previously expected earnings before deductions of between $85 million and $100 million from its PharmaHouse and Vert Mirabel holdings.
Canada's cannabis industry has struggled to reach profitability since legalization of marijuana products and companies have turned to cost cutting measures.