Canopy shares plunge as pot producer posts another loss

A Canopy Growth Corporation logo sign is displayed at its facility 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 fundamental loss on Friday, denting investors’ hopes that the cannabis producer would turn profitable any time soon, sending its shares tumbling. 8%.

The company’s quarterly gross margin was affected by a decline in production, lower prices in the Canadian recreational business, a change in business mix, and a drop in government payroll subsidies related to a job relief program. COVID-19.

Canopy has focused on high-potency, premium offerings and cut costs through layoffs, exits from some international markets and store closures in its bid to become profitable after nearly four years of cannabis legalization in Canada.

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Some of these cost-saving measures are being offset by higher wage inflation and supply chain costs, Chief Financial Officer Judy Hong said on a call, adding that most of the savings are expected to be recognized in the second half of fiscal year 2023.

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

Earlier this year, Canopy extended its time frame to profitability as fewer retail stores than expected and cheaper black-market fees hamper sales at legal recreational businesses.

The company, which first aimed to turn profitable in the second half of 2022, now expects to report core earnings only in fiscal 2024, excluding certain investments. Analysts estimate that 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 over prior year earnings.

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

($1 = 1.2919 Canadian dollars)

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Information from Rithika Krishna and Arunima Kumar in Bengaluru; Edited by Vinay Dwivedi

Our standards: the Thomson Reuters Trust Principles.

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