Aurora Cannabis Slashing Increased Profitability

Aurora Cannabis Slashing Increased Profitability ...

Get Aurora Cannabis Inc. Reportneeds to lower costs after embarking on a spending spree, and the company is willing to dramatically reduce its capacity to do so.

Two weeks after the company announced the closing of its roughly $40 million acquisition of Thrive Cannabis, the company said it will close its Aurora Sky facility.

Due to a difficult macro climate for recreational cannabis in Canada, the cannabis manufacturer will not need all of its capacity.

"Simply stated, our business is larger than we need, and we must consolidate ourselves in order to better secure our path to profitability and ultimately be successful in this industry in the long term," said Chief Executive Miguel Martin.

The sale is part of a strategy to save Aurora between C$150 million and C$170 million (US$118 million to US$133 million) in annualized expenses by the first half of next year, according to the company.

Aurora claims the closure is part of its desire to transform its business. For the third quarter ended March 31, the company reported a loss of C$1 billion (US$780 million).

It''s still surprising to some that Aurora is building its largest grow facility in Edmonton, Alberta, on the chopping block.

Aurora''''s Capacity Problem

Aurora said in 2020 that the Sky facility was part of a business with a total production capacity of 150,000 kilograms per year.

In the third quarter, the company sold only 9,722 kilograms of cannabis.

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"This decision is in line with our goal in the Canadian adult [recreational] market to focus on higher-margin premium categories and toward moving away from purposefully producing for the low- to no-margin categories," said Chief Financial Officer Glen Ibbott.

A 200-acre outdoor cannabis plant in Westwold, British Columbia, was also recently confirmed, which Aurora once referred to as one of the world''s largest.

Aurora told MJBizDaily that it "no longer had a commercial requirement for the Valley site."

Medical-Cannabis Margins

Aurora''s global medical cannabis business has over 60% margins.

In the third quarter, medical earnings from the country increased by 55% year on year, with the company now operating in seven European countries, including Germany, the United Kingdom, and France.

The third quarter medical included about 80% of Aurora''s revenue and nearly 90% of its gross profit.

Ibbott claims the company still has $480 million in cash and no-term debt.

Aurora said it expects to set a positive adjusted Ebitda run rate by the end of the first half of fiscal 2023.

Aurora''s stock fell by more than 40% on May 27 after the company reported that it would increase the amount of a financing to $150 million from $125 million.

The loan is being funded by a group led by Canaccord Genuity and BMO Capital Markets. Aurora will use the funds for general purposes.

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