Aphria shares fall after the marijuana producer cuts prospects for the entire year

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Aphria Inc. lowered its forecast for the entire year after it reported revenues in the second quarter that were below analyst expectations after a decline in sales of the company’s German pharmaceutical distribution business, while noticing a slight improvement in the amount of cannabis sold in the Canadian recreational market. market.

The cannabis producer based in Leamington, Ontario, reported a net loss of $ 7.9 million in the second quarter of fiscal year 2020, compared to a gain of $ 54.8 million for the same period last year. Analysts surveyed by Bloomberg expected the company to report a net loss of $ 9.7 million.

Aphria reported net income of $ 120.6 million, an increase of 457 percent over the same period last year, but a sequential decrease of the $ 126.1 million it reported in the previous quarter. Analysts expected Aphria to report $ 130.4 million in revenue. Aphria also reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 1.9 million in the quarter, an improvement of the $ 9.5 million loss reported a year earlier.

The marijuana giant also reported $ 33.7 million in cannabis revenues in the quarter, selling 5,567 kilograms, above the $ 30.8 million, but below the 5,969 kilograms sold in the previous three-month period. Meanwhile, the company attributed $ 86.4 million of its sales to its German pharmaceutical distribution business, which was affected by changes in its reimbursement model and seasonality.

Aphria also adjusted its forecast for fiscal year 2020 with revenue projections that are now believed to be approximately $ 575 million to $ 625 million, below the $ 650 million to $ 700 million that the company previously forecast. The company said the decline in projected revenues for the entire year reflects “some market dynamics,” including slower than expected retail openings in Ontario, a temporary ban on vaping products in Alberta and a decline in growth. of its pharmaceutical distribution business in Germany.

The company also forecasts approximately $ 35 million to $ 42 million in adjusted EBITDA, below an earlier forecast of $ 88 million to $ 95 million.

Jefferies Financial Group analyst Owen Bennett said in a report to clients on Tuesday that Aphria continues to improve its participation in the Canadian recreational cannabis market, highlighting how the company had to buy legal marijuana from other suppliers because the demand exceeded Your existing offer.

“Although revenues were lower than expectations driven by the distribution business, Aphria delivered a positive adjusted EBITDA for the third consecutive quarter, exceeding consensus expectations here once again,” said Bennett.

Bennett added that the company’s revised outlook is largely due to the temporary ban on vaping products in Alberta and Quebec. The company said it plans to add 34 new vape products to its portfolio and expects to launch a new cannabis grocery portfolio in the next two quarters.

Aphria also announced Tuesday that he would remove “interim” from Irwin Simon’s title, making him the company’s permanent executive director. Simon, who also serves as president of the company, has been managing Aphria on an interim basis since January 2019.

During a conference call with analysts on Tuesday morning, Simon said the company is exploring “multiple opportunities” in the United States, but did not provide details on when it would announce plans to enter the world’s largest cannabis market.

“We are not going to jump [the U.S.] to an unknown situation, “said Simon.” I want Aphria to be a global packaged business that has a connection with the cannabis industry. “

Aphria chief financial officer Carl Merton told analysts during the conference call that the company has $ 497.7 million in cash, part of what he described as a “balance sheet enviable by the industry.” Of that cash, approximately $ 45 million goes to its German business operations. , another $ 50 million to build its Colombian subsidiary, $ 10 million for domestic extraction purposes and around $ 50 million to complete the construction of its Diamond greenhouse in Leamington.

The remaining $ 300 million to $ 350 million in cash that the company left in its balance sheet will be designated for “future strategic initiatives,” as in the United States and for troubled Canadian assets, Merton said.

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