If cannabis investors were looking for a Christmas miracle in the form of a sign indicating a turnaround in the sector, they did not get this from Hexo (NYSE :), (TSX 🙂 yesterday when the Marijuana based in Quebec are growers first quarterly results for the financial year 2020
Hexo's share price fell by more than 3% on the day and reached US $ 2.17 (C $ 2.85) on news that the company had a loss of C $ 62.4 million (US $ 47 Million) booked in the three-month period that ended 31 October. The downward effect on the share seemed to drag others in the sector, such as Aphria (NYSE :), (TSX 🙂 and Aurora Cannabis (NYSE :), (TSX 🙂 also saw their stock prices hit.
The total losses were a substantial increase from the loss of C $ 12.8 million (US $ 9.72 million) recorded in the same period last year. It was even more than the previous quarter that a deficit of C $ 56.7 million (US $ 43.06 million) registered.
The disappointments in the latest Hexo financial statements reached across the board, from net income and expansion plans to operating costs.
Net sales declined and amounted to C $ 14.5 million (US $ 11.012 million) compared to C $ 15.4 million (US $ 11.698 million) the previous quarter. Net sales in the first quarter of financial 2019 amounted to C $ 5.7 million (US $ 4.33 million). Although Hexo sold more cannabis in the last quarter, weaker sales were attributed to significantly lower prices.
No specific reference was made to when and how Hexo intended to enter the American market.
And even news about sharp austerity measures – such as the 25% decrease in operating costs, which fell to C $ 35.1 million (US $ 26.66 million) from C $ 46.9 million (US $ 35.62) million) the previous quarter – could not rise to the good news threshold as part of the decrease in costs was due to staff cuts, which led to C $ 3.7 million (US $ 2.81 million) in restructuring expenses to cover "termination benefits and other wage-related termination costs".
It is also worth noting that, despite the reduction in operating costs, they are still at a level that is more than double the net income.
In addition to the bad news, reports from analysts with RBC Capital Markets predicting that Hexo on the road to positive EBITDA in 2020 is not entirely clear.
If there was any other hope that Hexo wanted to reverse his fortune with the release of the so-called 2.0 derived products – the edible products, vapes and subjects – the company indicated that it paused a bit in this regard. It only intends to increase the introduction of these products towards the middle and second half of the fiscal year, well behind other players such as Canopy Growth (NYSE :), (TSX :).
First week of legal cannabis sales in Michigan shows promise
Federal legalization of cannabis in the US is generally accepted as the only step that would be the biggest game changer for the industry on both sides of the border. An indication of how big the impact would be came last week, when the first figures were released following the move to legalize the state of Great Lakes.
The first week of legal sales in Michigan, from December 1-8, saw US $ 1.6 million (C $ 2.1 million) sold in recreational marijuana, according to a report in the Detroit Free Press.
Those figures were collected in just five stores, three of which were sold out or had limited stocks, according to the report.
State officials have estimated that, once fully established, annual sales will reach US $ 949 million (C $ 1.3 billion), with a total tax revenue of state and excise duties of US $ 151.9 million (C $ 200 million).
Michigan has a population of just under 10 million, making it the tenth most populated state in the US
Canadian university to offer cannabis cultivation course
Just over a year ago, Canada became the first G7 country to legalize cannabis nationally. Now one of the best universities in the country is about to offer his first diploma in cannabis cultivation.
Earlier this month, McGill University in Montreal announced that it would offer a commercial cannabis degree to meet the growing demand of the growing cannabis growing industry for trained biologists. The course will be offered through the university's agricultural faculty with the aim of educating individuals who have already earned a bachelor's degree in biology, agriculture or environmental sciences. All candidates must pass a criminal background check and receive a security clearance from the federal government. And the costs for the one-year program will be C $ 24,000 (US $ 18,220).
Anja Geitmann, the dean of the faculty of agricultural and environmental sciences at the university, said she was approached by industry stakeholders in the past year. Industry is desperate to hire people with knowledge of plant sciences. The course now offers biologists a specialization in growing cannabis, with which they can also develop new varieties, protect the plants from contamination and understand the legal framework in which industry must operate.
Guelph University in Ontario, which also has a large faculty for agriculture, offers a course for cannabis cultivation at college level.
