Aphria’s shares drop after the vase maker has cut prospects for the whole year

Aphria Inc. downgraded its full-year forecasts after recording second-quarter earnings below analysts’ expectations following a drop in sales from the company’s German pharmaceutical distribution sector, while noticing a slight improvement in the amount of cannabis sold in the Canadian recreational market.

The Leamington, Ontario-based cannabis producer reported a net loss of $ 7.9 million in the second quarter of fiscal 2020, compared with a gain of $ 54.8 million in the same period last year. Analysts interviewed by Bloomberg expected the company to report a net loss of $ 9.7 million.

Aphria posted net revenues of $ 120.6 million, up 457 percent from the same period last year, but a sequential drop from the $ 126.1 million in the previous quarter. Analysts had expected Aphria to report $ 130.4 million in revenue. Aphria also posted an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 1.9 million in the quarter, an improvement on the loss of $ 9.5 million a year earlier.

The pot giant also reported $ 33.7 million in cannabis revenue in the quarter, selling 5,567 kilograms, up from $ 30.8 million but short of 5,969 kilograms sold in the previous three months. In the meantime, the company attributed $ 86.4 million of its sales to its German pharmaceutical distribution business, which was influenced by changes to its repayment and seasonality model.

Aphria also adjusted its forecasts for 2020 with revenue projections now believed to be between around $ 575 million and $ 625 million, down from the $ 650 million to $ 700 million previously forecast by the company. The company said that the drop in revenue forecast for the full year reflects “certain market dynamics”, including slower than expected retail openings in Ontario, a temporary ban on vaping products in Alberta and a drop in growth in its German pharmaceutical distribution business.

The company also expects Adjusted EBITDA of approximately $ 35 million to $ 42 million, down from a previous forecast of $ 88 million to $ 95 million.

Jefferies Financial Group analyst Owen Bennett said in a client report Tuesday that Aphria continues to improve its Canadian market share in the recreational cannabis industry, pointing out how the company had to purchase a legal pot from other suppliers due to the demand that exceeded the existing offer.

“Although revenues are lower than the expectations driven by the distribution sector, Aphria produced a positive adjusted EBITDA for the third consecutive quarter, once again beating consensus expectations,” said Bennett.

Bennett added that the company’s revised outlook is largely due to the temporary ban on vaping products in Alberta and Quebec. The company stressed that it plans to add 34 new vaporization products to its portfolio and hopes to launch a new cannabis-based food portfolio in the next two quarters.

Also on Tuesday, Aphria announced that it would remove the term “tentative” from the title of Irwin Simon, making it the company’s permanent CEO. Simon, who also serves as the company’s president, has been managing Aphria ad interim since January 2019.

During a conference call with analysts on Tuesday morning, Simon said the company is exploring “multiple opportunities” in the United States, but did not give details of when the company would announce plans to enter the world’s largest cannabis market.

“We will not enter [the U.S.] to an unknown situation, “said Simon.” I want Aphria to be a global packaged product company that has a connection with the cannabis industry. “

Aphria’s Chief Financial Officer, Carl Merton, told analysts during the conference call that the company has $ 497.7 million in cash, part of what it has described as an “enviable balance sheet in the industry”. Of that money, approximately $ 45 million goes to its German commercial operations, another $ 50 million to build its Colombian branch, $ 10 million for domestic extraction purposes, and approximately $ 50 million to complete the construction of its Diamond greenhouse in Leamington. .

The remaining $ 300 million to $ 350 million in cash that the company has left in its balance sheet will be designated for “future strategic initiatives” such as in the United States and for troubled Canadian businesses, Merton said.

Cannabis Canada is the series of insights by BNN Bloomberg that explores the extraordinary formation of the completely new and controversial Canadian recreational marijuana industry. Read more from the special series here and sign up for our Cannabis Canada newsletter to get the latest marijuana news straight to your inbox every day.

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