Canopy Growth posts smaller Q1 core loss, reiterates going concern doubts

Cam White | August 10, 2023

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By Sourasis Bose

(Reuters) -Canopy Growth again raised doubts about its ability to stay afloat as the Canadian pot producer’s loss-making streak continued in the first quarter.

Despite a strong start following the legalization of pot in Canada in 2018, the country’s cannabis industry has faced intense competition from cheaper marijuana that is sourced illegally.

Canopy had first raised the going concern doubts in June.

The company has taken several initiatives to turn profitable, including job cuts, exits from some international markets, store closures and divestiture of its retail business across Canada.

The Smiths Fall, Ontario-based company had C$533.3 million in cash and cash equivalents as of June 30, compared with C$677 million at the end of March.

Its total debt was C$1.05 billion at the end of the reported quarter.

The cannabis firm’s quarterly net revenue grew 3% to C$108.7 million, aided by expansion in its BioSteel segment, which makes sports nutrition products.

But its second-quarter sales are expected to be lower sequentially due to seasonality, Chief Financial Officer Judy Hong said in a post-earnings conference call.

The company is also facing an investigation from the U.S. Securities and Exchange Commission over the reporting of revenue from BioSteel.

Canopy had launched an internal review in June for BioSteel and let go of several members of the segment’s leadership team following completion of the assessment.

The company’s adjusted core loss narrowed to C$57.8 million for the three months ended June 30, compared with a loss of C$79 million a year earlier, aided by cost reduction.

The company lowered costs by C$47 million during the quarter, though it saw higher warehousing and production expenses associated with the BioSteel manufacturing facility located in Verona, Virginia.

(Reporting by Sourasis Bose in Bengaluru; Editing by Shinjini Ganguli and Shilpi Majumdar)