Cannabis Professional’s daily roundup of industry news. View archive here.
HEXO slashed its Q4 revenue guidance, citing “lower than expected product sell through” and has withdrawn its 2020 revenue guidance. TGOD shares plummeted 17.3 per cent after the company failed to secure bank finance. The SQDC will open 20 new stores by March, according to The Montreal Gazette. Canopy has named Constellation Brands CFO David Klein as the new chair of its board. Village Farms announced a $25-million bought deal. Meanwhile, MediPharm said it has increased the size of its credit facility to $38.7-million and Cannara said that it has secured a $6-million mortgage from CIBC. Canopy announced the results of recycling program and Nielsen and Charlotte’s Web announced a CBD data partnership.
– Mark Rendell
HEXO slashes Q4 revenue guidance, drops 2020 outlook
HEXO Corp. is warning that its fourth quarter revenue will be considerably lower than the company’s previous expectation and guidance, “primarily due to lower than expected product sell through.” The company also said on Thursday that it has withdrawn its $400-million 2020 revenue outlook.
During its last earnings call, HEXO said it would double its $15.9-million in revenue in the coming quarter. The company is now projecting “net revenue for the fourth quarter to be approximately $14.5 million to $16.5 million and net revenue for the year to be approximately $46.5 million to $48.5 million.”
The company blamed “slower than expected store rollouts, a delay in government approval for cannabis derivative products and early signs of pricing pressure are being felt nationally.”
“The delay in retail store openings in our major markets has meant that the access to a majority of the target customers has been limited. Additionally, regulatory uncertainty across the pan-Canadian system and jurisdictional decisions to limit the availability and types of cannabis derivative products have contributed to an increased level of unpredictability,” the company said.
The announcement comes six days after the company’s CFO Michael Monahan resigned, citing family reasons. He’d only been with HEXO for four months.
The company plans to release year-end financial results on Oct. 24.
– Mark Rendell
Quebec to open 20 new cannabis stores by March: report
The Société Québécois du Cannabis (SQDC) plans to nearly double the number of cannabis stores in Quebec over the next six months, according to reporting by the Montreal Gazette.
On Wednesday, The Gazette reported comments SQDC president Jean-François Bergeron, who said that the SQDC intends to open an additional 20 stores by March. That would bring the total number of cannabis stores in the province up to 43
Mr. Bergeron also foresees the SQDC posting a profit of $20 million for the current fiscal year, The Gazette reported.
– Mark Rendell
TGOD shares drop 17.3 per cent after company fails to secure bank finance
The price of The Green Organic Dutchman Holdings Ltd. shares dropped 17.3 per cent on Wednesday after the company said it was unable to secure bank financing “due to changing market conditions,” calling into question its ability to complete the build out of two large greenhouse facilities.
TGOD’s failure to obtain capital “on acceptable terms within the timeframes required” has forced the company to begin a “review of additional alternatives,” the company said in a news release.
At the end of June, TGOD needed an additional $7.6-million to complete the construction of its facility in Ancaster, Ont. and $69.9-million to complete construction of its facility in Valleyfield, Que, according to the company’s most recent financial statements. In addition to construction costs, TGOD needed $63-million to equip the two facilities.
TGOD said on Wednesday that it has $56.7-million in cash available in Canada. The company burned through $105.6-million in cash in its most recent quarter.
“Notwithstanding the 17% stock decline today, we believe there is further downside risk now that traditional credit financing sources have become unavailable,” wrote Bank of Montreal analysts in a note on Wednesday, where they downgraded TGOD stock to “underperform” and dropped their price target from $2.00 to $0.70.
“In a worst case scenario, if the company is unable to secure external financing soon, there would be risk to the company’s going concern status,” wrote BMO analysts Tamy Chen and Peter Sklar.
“We believe that even if the company can secure alternative financing(s), these sources would likely add further pressure to the company’s operations as there would likely be high service costs (e.g., high yield debt) and/or result in significant dilution to existing shareholders (e.g., equity or converts),” they wrote.
– Mark Rendell
Village Farms International Inc. announced $25-million bought deal
Village Farms International Inc. will raise $25-million in a bought deal underwritten by Beacon Securities Limited and GMP Securities L.P.
The deal is priced at $9.40 a share, an 11 per cent discount to where Village Farms finished trading on Wednesday.
“The closing of the Offering is expected to occur on or about October 22, 2019 and is subject to the completion of formal documentation and receipt of all necessary regulatory and stock exchange approval. The Company intends to use the net proceeds of the Offering for working capital and general corporate purposes,” the company said.
- Mark Rendell
MediPharm and Cannara announce new bank loans
MediPharm Labs Corp. has increased the size of its credit facility “with a top 5 Canadian Schedule 1 bank” to $38.7-million, up from the $20-million.
The set of loans are “comprised of a revolving term facility, a non-revolving term facility and a non-revolving delayed draw term facility.”
Meanwhile, Cannara Biotech Inc. said that is has secured a $6-million mortgage from Canadian Imperial Bank of Commerce.
“These funds will reduce the existing vendor take-back mortgage, thereby significantly reducing debt service costs,” Cannara said on Thursday.
Canopy names Constellation Brands CFO David Klein as new chair of board
Cannabis producer Canopy Growth Corp said on Thursday it has appointed Constellation Brands Inc Chief Financial Officer David Klein as the new chair of its board, effective immediately.
Canopy said John Bell, who held the position of interim chair over the past few months, will remain as a director of the board.
Tweed and TerraCycle collect 1 million cannabis packages for recycling
The Tweed-TerraCycle program, which launched in October 2018, said this week that it has collected more than one million pieces of used cannabis packaging across Canada. The program provides collection bins for items to be recycled.
“We're committed to doubling down on our efforts to expand the program over the next year and bringing in new participants from all across Canada," said Mark Zekulin, chief executive of Canopy Growth Corp., Tweed’s parent company.
Alberta by far collected the most packages through the program at nearly 408,000 items, more than double the 168,550 gathered in New Brunswick. In Ontario, Canada’s biggest consumer market that has just 24 licensed pot shops, collected 168,545 cannabis packages through the program. Alberta has the most licensed retail cannabis stores in Canada.
The companies did not state whether or not all the packages were successfully recycled.
- Marcy Nicholson
Nielsen and Charlotte’s Web form alliance to show CBD market insight
Market intelligence company Nielsen and hemp-derived CBD producer Charlotte’s Web Holdings, Inc. in the United States have formed an analytic relationship. The two companies said they will “help guide the U.S. retail market for consumer packaged goods (CPG) companies through the evolution of the CBD space.”
The alliance aims to reveal market-leading trends, and highlight the segments, brands and products that resonate with consumers in the relatively new CBD market. The relationship will also give insight into consumer attitudes and product preferences.
- Marcy Nicholson