Canopy Growth, the world’s highest-valued cannabis company by market capitalization, reported weaker than expected earnings this quarter, driven by restructuring costs and challenges in the Canadian cannabis market.
The company’s net revenue declined by 15 percent to $76.6 million (Canadian dollars) from the previous quarter. Net losses, though nowhere near as large as in the previous quarter, increased by 13 percent to $374.6 million from the same time last year.
The company took on restructuring costs to the tune of $32.7 million mainly related to product returns and price cuts for its softgel and oil products. In addition, fewer-than-expected cannabis retail store openings in Canadian provinces, primarily Ontario—the most populous province in the country—have weighed down earnings, the company said.
Canada has also been slow to rollout cannabis edible and vapes, with lawmakers wanting to wait a full year after legalization of adult-use flower before letting extract-based products hit the market.
“It’s been a challenging couple of quarters in the cannabis sector,” said Mark Zekulin, CEO of Canopy Growth, on an earnings call Thursday morning.
Revenue from recreational and medical cannabis sales in Canada combined was down 7 percent from the previous quarter. However, international medical cannabis sales revenue rose by 72 percent to $18.1 million from the last quarter.
Canopy admitted that it is “increasingly unlikely” the company will meet its net revenue target of $250 million by the end of the current fiscal year as a result of poor retail sales. The company will also be slowing down investments over the next year.
“Our next wave of investment will be in the US, but it’s a much smaller wave initially,” the company noted on the call.
Canopy has already made significant investments in the United States, where, as Cannabis Wire first reported, the company has also begun to lobby at the federal level. The company is in the process of acquiring Acreage Holdings, a United States based cannabis multi-state operator, and unveiled a multi-million dollar hemp industrial park in upstate New York in August. Canopy remains optimistic about its investments as well as consumer demand for CBD in the United States, the company said.
(Read Cannabis Wire’s coverage of Canopy’s hemp industrial park here.)
Zekulin also noted that the search for his replacement continues and an announcement is likely in the next few weeks. Zekulin stepped in as interim CEO after Canopy founder and CEO Bruce Linton was ousted in part due to pressure from global alcohol giant Constellation Brands, which invested $4 billion into the company.
“I can confirm that the company is continuing to explore a very short list of exceptional candidates that we expect to make a further announcement within the coming weeks,” Zekulin said.
Canopy’s shares dropped more than 3 percent following the call.