It’s all about Quebec today. Gatineau-based HEXO saw revenues dip and net losses increase in the most recent quarter. The company did, however, increase its production in the quarter. The Société Québécoise Du Cannabis (SQDC) said it sold $71-million worth of cannabis in the first half-year of the legal recreational market. Neptune, an extraction company in Sherbrooke, posted its first cannabis-related revenues, but saw losses mount due to legal issues.
– Mark Rendell
Table of contents Hexo revenues decline • SQDC reports financials • Neptune earnings
HEXO revenue tails off, net losses almost double
HEXO Corp. saw revenue tail off and net losses nearly double, quarter-over-quarter, in the three months leading up to April 30. The company, which released its quarterly financials late Wednesday evening, posted a $7.75-million net loss on $13.02-million in sales in the quarter, compared to a $4.33-million loss on $13.44-million in sales in the previous quarter.
The increase in net loss was driven largely by an increase in operating expenses. And while HEXO actually sold 8 per cent more “kilogram equivalents” of cannabis in the quarter, it saw its top line whittled away by pricing declines, mostly in the adult-use market.
“Gross adult-use revenue per gram equivalent decreased to $5.29 from $5.83… This is reflective of increased dry flower sales in the sales product mix during the quarter which command lower market sales prices per gram,” the company said in its MD&A.
The company also sold less cannabis into the medical market, where pricing also came down, but remained considerably higher than in the adult-use market.
Despite showing no top-line growth, the company is ramping up production. It reported growing around 9,800 kilograms in the quarter, compared with just shy of 5,000 kilograms grown in the preceding quarter. It will also be bringing more production capacity online shortly through its acquisition of Newstrike, which closed after the end of the quarter.
Quebec recreational pot sales at $71-million by March, SQDC reports nil net income
The Société Québécoise Du Cannabis (SQDC) said it sold $71-million, or 9,900 kilograms, of marijuana in the first five-and-a-half months of the legal adult-use industry. The government corporation expects to become profitable in 2019/20 after reporting a financial balance in its first fiscal year that ended March 30.
The Quebec government covered SQDC’s $4.9-million loss from start-up costs. Other expenses tallied up to $13.2-million. The crown corporation generated roughly $29.7-million in revenue for the Quebec government from consumption and excise taxes, it said.
The provincial government has budgeted SQDC’s 2019/20 net earnings at $20-million, which would create $89-million in government revenue from consumption and excise taxes, SQDC said.
Store sales of 8,000 kg totaled $57.6-million in the fiscal year as store hours were cut to four days a week for several months due to a nation-wide supply shortage. The stores are now open every day. Online purchases reached $13.7-million for 1,900 kg of pot. SQDC estimates that Quebec saw the highest provincial sales within the first months of operation.
All profits will be reinvested in prevention efforts and cannabis research, SQDC said.
- Marcy Nicholson
Neptune records first revenue from cannabis operations, posts large loss due to litigation
Quebec extraction company Neptune Wellness Solutions did $12,000 in sales from cannabis operations in the three months that ended on March 31. That’s the first money the company has made from cannabis, as it transitions away from its traditional krill oil business.
Overall revenue for the quarter was roughly $5.7-million, although almost all of this came from royalty payments related to its legacy nutraceutical business.
“Neptune commenced commercial cannabis extraction during the quarter. We have commissioned our CO2 extraction equipment which was in operations for less than 10 days during the quarter to process cannabis biomass and extract cannabinoids… As part of our operations, lab testing and batch release increase the lead-time to market and delay slightly our revenue recognition from cannabis extraction,” the company said in its MD&A.
The company also posted a net loss of $12.4-million in the quarter, led largely by losses due to litigation.
The company had been sued by its former-CEO for wrongful dismissal and unpaid royalties. In March, a court judgement forced Neptune to pay roughly $2.1-million to its former CEO. The company also incurred a litigation expense of roughly $6-million.
The court further ruled that, “the royalty payments of 1 per cent of the future sales and other revenue made by the Corporation on a consolidated basis are to be payable by the Corporation to the Former CEO biannually.”