Canopy shares plunge as pot producer posts another loss

A sign displaying the Canopy Growth Corporation logo is pictured at its factory in Smiths Falls, Ontario, Canada, January 4, 2018. REUTERS/Chris Wattie/File Photo/File Photo

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Aug 5 (Reuters) – Canopy Growth Corp (WEED.TO) posted another basis loss on Friday, which dented investors’ hopes that the cannabis producer would soon turn profitable, sending its shares tumbling 8%.

The company’s quarterly gross margin was impacted by lower production, lower prices in the Canadian recreational sector, a change in business mix and lower government wage subsidies related to a COVID relief package -19.

Canopy has focused on higher-end, high-powered offerings and undertaken cost-cutting through layoffs, exits from certain international markets and store closures in a bid to become profitable, after nearly four years of legalization. cannabis in Canada.

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Some of these cost-cutting measures are being offset by higher wages and supply chain costs, chief financial officer Judy Hong said on a call, adding that the majority of savings are expected to accrue over the course of the year. second half of fiscal year 2023.

“We expect cost savings to increase in the second half of the year,” Hong added. Canopy realized more than C$40 million ($30.96 million) in savings during the quarter.

Earlier this year, Canopy extended its deadline to achieve profitability as fewer retail stores than expected and cheaper black market prices cut sales for legal hobby businesses.

The company, which initially aimed to become profitable by the second half of 2022, now expects to report core earnings only in fiscal 2024, excluding some investments. Analysts believe it will be delayed for another year.

The cannabis producer also took a C$1.73 billion hit in the quarter due to asset impairment charges and restructuring costs, forcing it to post a net loss to earnings. ‘last year.

It posted an adjusted basic loss of C$74.8 million in the first quarter ended June 30, compared with a loss of C$63.6 million a year earlier.

($1 = 1.2919 Canadian dollars)

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Reporting by Rithika Krishna and Arunima Kumar in Bengaluru; Editing by Vinay Dwivedi

Our standards: The Thomson Reuters Trust Principles.

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