BUSINESS NEWS
FEBRUARY 09, 2021 / 08:02 AM
Pot producer Canopy Growth sees profit in 2022 as costs drop, sales rise
(Reuters) - Canopy Growth Corp, the world’s largest pot producer, said on Tuesday it expects to turn a profit in the second half of 2022 after aggressive cost-cutting and higher demand for cannabis products helped narrow third-quarter losses.
Canadian pot producers have been under pressure from investors seeking returns as profits remain elusive due to oversupply crimping sales in Canada and overseas expansion bets turning sour.
Canopy said it expects to start generating cash by fiscal 2024 and become operating cash flow positive a year before that, soothing market worries on profitability and sending the company’s shares up 2%.
Since early last year, Canopy and its rivals like Aphria Inc and Aurora Cannabis Inc have been slashing expenses by shuttering plants, scaling down indoor cultivation and laying off hundreds of employees.
Canopy is also pinning its hopes on the large U.S. market that is likely to open up, thanks to the Joe Biden administration’s favorable view on the cannabis industry.
Meanwhile, market conditions too have improved. As the pandemic shuttered several businesses and economies contracted, demand for cannabis products such as gummy bears, brownies and drinks, known for their links to relaxation, surged.
Canopy, which sells a range of products from dried flowers to chocolates and drinks mixed with weed, said its net revenue rose 23% in the quarter to C$152.5 million.
Its adjusted loss shrank to C$68.4 million ($53.74 million)from C$97 million in the third quarter, although asset impairments and one-time restructuring costs led the company to post a net loss of more than C$900 million.
Expenses dropped by 15% to C$144.1 million.
($1 = 1.2737 Canadian dollars)
Reporting by Arunima Kumar and Shariq Khan in Bengaluru; Editing by Arun Koyyur
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