HIGHLIGHTS
- Aurora says it claimed 20 pct of Canada’s recreational pot market
- The LP increased cannabis output by 57 pct in its Q2
- Average dried cannabis selling price dropped 26 per cent, gross margin shrunk
Aurora Cannabis Inc. sold a record amount of cannabis that lifted its revenue in its second quarter, but the pot producer’s selling price fell sharply as it entered the competitive recreational market and absorbed the new tax that was added to medical marijuana sales.
The Edmonton-based company’s quarterly financial results released Monday evening shed light on the pressure marijuana producers face as they seek to ramp up production and adjust to rising costs associated with new regulations.
“If I lose sleep over anything, it’s our ability to supply this growing market,” said Terry Booth, chief executive of Aurora, while on a conference call with analysts late Monday.
“It’s at least five years before we have an oversupply situation for companies that can export.”
Aurora said it claimed roughly one-fifth of the new recreational market, which has been plagued by supply shortages. “We are ramping up production rapidly,” said chief corporate officer Cam Battley.
During its second quarter, Aurora said it increased cannabis production by 57 per cent to 7,822 kg and raised the amount it sold by 162 per cent to 6,999 kg, as it “significantly” scaled up its cultivation operations.
But the company’s average selling price of dried cannabis dropped by 26 per cent, the company said, and its gross margin on cannabis sales was at 54 per cent, down from 70 per cent the prior quarter, primarily due to a lower average selling price per gram of dried cannabis, the mandatory tax that was added to medical marijuana in October and temporarily lower proportion of cannabis oil sales in the company’s revenue mix. The company’s loss for the quarter ballooned to $237.8-million.
Still, with much of the investor and analyst focus on the nascent recreational market, Aurora said it will continue to prioritize its medical cannabis business – a segment that remained larger and more profitable for the company.
“We are positioned to capture a larger part of medical market in Canada and abroad,” Mr. Battley said.
“We are going to be focusing primarily on the higher margin, medical market.”
Aurora’s numbers for the period ended in December offered investors a first glimpse into the 2.5 months since the legalization of recreational cannabis in mid-October. Aurora touted overall quarterly sales of $54.2-million, up 83 per cent from the prior quarter, $21-million of which came from in recreational sales.
Legal recreational cannabis sales in Canada have been subdued by insufficient supplies despite strong demand, causing Ontario – the country’s biggest market – to limit its initial round of retail licence offerings to just 25 through a lottery process and Alberta to impose a pseudo-moratorium on licences in November. There are 75 licensed retail stores in Alberta, but some run out of supplies between weekly deliveries.
Also on Monday, Aurora said it completed its first commercial cannabis oil export to a pharmacy in the United Kingdom, where specialist doctors can prescribe it.
Last month, Aurora signed a deal to buy Whistler Medical Marijuana Corp. in an all-stock deal worth up to $175-million, giving it access to premium and organic-certified products from the privately held company that operates two indoor licensed production facilities.