Marijuana Stocks: Aurora Cannabis Sales Strong, Losses Deepen – Investor’s Business Daily
Canadian marijuana producer Aurora Cannabis (ACB) reported fiscal second-quarter sales that came in at the high end of an earlier forecast, even as the company’s losses ballooned. Aurora Cannabis stock and other marijuana stocks were mostly lower after Monday’s close.
The company’s results arrive as investors look for more insights into how Canada’s biggest pot companies are navigating the nation’s nascent recreational market. Canada’s biggest producers are losing money as they try to expand to other nations and increase their production capacity. Shortages in the nation’s supply of recreational weed have forced some dispensaries to close until they can get more supply.
Aurora has driven financial results higher in previous months in part by big acquisitions and investments. The company’s fiscal second quarter encompasses the three months ended Dec. 31. Legal recreational marijuana sales in Canada began on Oct. 17.
Canaccord Genuity analyst Matt Bottomley said the results from Aurora and Canopy Growth (CGC), which reports Thursday, would give investors their “first real look” at the sales potential for the nation’s biggest licensed weed growers.
Aurora Cannabis Earnings
Aurora Cannabis reported net sales of 54.178 million Canadian dollars, up 83% from the prior quarter and a 363% jump from the period a year ago. Those results compare to the company’s forecast last month for net sales of 50 million to 55 million Canadian dollars. At the time, forecast fell short of some estimates.
Aurora attributed the sales gains to solid demand in Canada’s recreational market. The company sold 21.6 million Canadian dollars of recreational weed during the quarter. Aurora said it believed its products accounted for around a fifth of Canada’s recreational sales during the quarter.
“The Company anticipates that the launch of new derivative product lines, once allowed under Health Canada regulations, will contribute to improving margins,” it said in a release. Products like vaping devices and edibles, which have become more popular, won’t be available until later this year.
Medical sales in Canada and internationally came in at 26 million Canadian dollars. The company said it expected to have around 25,000 kilograms of marijuana products for sale in the quarter ending in June.
Costs Hit Margins
However, the company’s loss attributable to common shareholders widened to 237.8 million Canadian dollars. Aurora said that gross margins on cannabis sales “temporarily” fell during the quarter to 54%, from 70% in its fiscal first quarter.
The company attributed the margin drop to a lower average selling price, excise taxes on sales and a lower mix of cannabis oil sales. Products with cannabis oil tend to be higher-margin.
Packaging regulations and costs related to bringing its massive Aurora Sky facility to full production also cut into margins. The company said that facility is fully complete and will reach full production capacity “shortly.”
The company said cash cost to make a gram of dried buds temporarily rose to 1.92 Canadian dollars, from 1.45 in the prior quarter. Sales, general and administrative costs held at the same levels as the prior quarter. Aurora said those costs would fall once its Aurora Sky production facility was running at full capacity.
Aurora said it produced 7,822 kilograms of cannabis during the quarter and sold 6,999, as it brings more of its grow-house space online.
Aurora Cannabis Stock, Other Marijuana Stocks
Aurora Cannabis stock lost 1.1% in the stock market today. The company has a Composite Rating of 97 out of a best-possible 99. That’s the strongest showing of the U.S.-listed Canadian marijuana stocks.
Aurora Cannabis stock has a strong Relative Strength Rating of 91. The rating measures a stock’s performance over the past 12 months.
Among other marijuana stocks, Canopy Growth (CGC), which reports earnings on Thursday, was flat after the closing bell. Cronos Group (CGC) slipped 1.2%. Cronos has an 85 Composite Rating.
Tilray (TLRY) was flat. Aprhia (APHA) dipped 0.4%.
Next Episode Of The Marijuana Industry ‘Sh*tshow’
Aurora Cannabis in November said it invested in a “a significant number” of marketing efforts to boost awareness for its recreational products. Survey results from GMP Securities in October indicated few people were aware of the different products offered by Canada’s pot producers.
Total legal sales of dry buds in December rose 4% from November, according to Canadian government data released last month. Sales of cannabis oil rose 2% over that time. Statistics Canada also indicated that the rate of cannabis usage hadn’t really changed since legalization.
Aurora CEO Terry Booth, at a conference in November, said Canada’s legal recreational market would likely remain a “sh*tshow.” And he said Ontario, Canada’s most populous province, handled the rollout the worst. Industry executives expect the shortages to last through at least this year.
Ontario began its recreational sales via an online, government-run store. The province recently handed out the first 25 physical-retail licenses via a lottery system.
Executives from Aurora and Canada’s other producers have said the bigger opportunity, long term, resides in selling medical marijuana to other nations that have legalized it.
Aurora on Monday said it had made its first commercial export of cannabis oil to the U.K. The company said that product “has been successfully dispensed from a pharmacy.”
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