Achi news desk-
A worker checks cannabis plants inside the hot house of the Tilray factory in Cantanhede, Portugal on April 24, 2019.RAFAEL MARCHANTE/Reuters
TLRY-T cut its projected earnings for the financial year and reported revenue that fell short of analysts’ estimates, sparking a sharp sell-off in the cannabis producer’s shares along with some other players in the sector.
Tilray reported a US$105-million loss for its fiscal third quarter ended February 29, compared with a US$1.2-billion loss a year earlier, when it recorded a large one-time impairment charge.
The company also cut its forecast for earnings before interest, tax, depreciation and amortization (EBITDA) for the 2024 financial year ending May 31 to between US$60-million and US$63-million, down from between US$68 -million and US$78-. million. Tilray also said it no longer expects to report positive adjusted free cash flow for the year.
The results are the latest sign that the cannabis sector continues to struggle amid industry oversupply, fierce competition, and weak prices and margins, causing recent insolvencies among small cannabis growers unable to generate enough cash to pay their bills. costs.
Since the start of 2024, four small and medium producers have filed for creditor protection under the Companies Creditors Arrangement Act, with combined liabilities of more than $150-million, and one has posted a notice of intent to file under the Bankruptcy and Insolvency Act. Act. This is on top of at least 18 companies that filed under CCAA and the Bankruptcy Act last year.
The companies that filed for creditor protection in the past few months have said they are suffering significant losses from high interest rates on debt and, in some cases, a high tax burden.
Tilray’s net revenue in the quarter was up 30 percent to $188.3-million, helped by acquisitions but short of analysts’ expectations. The company has the largest share of the recreational market in Canada, with just over a third of its revenue coming from the sale of cannabis, while it has also acquired several US craft beer brands.
Tilray shares plunged more than 20 percent on the Toronto Stock Exchange on Tuesday, while shares of rival cannabis producer Canopy Growth Corp. fell. WEED-T nearly 10 percent and shares of Aurora Cannabis Inc fell nearly 9 percent. a hundred
“Fundamentals for licensed producers, on average, remain challenging, with cash burn an issue for most companies, as well as deflationary pressures in the Canadian market,” said Pablo Zuanic, managing partner of the equity research firm. cannabis Zuanic & Associates, in e-. mail.
“In our view, the natural attrition and potential M&A activity will benefit the stronger companies – those with sustainable and strong balance sheets,” he said.
Heritage Cannabis Holdings CANN-CN, which entered creditor protection on April 2 with $35-million in liabilities, has $11.7-million in unpaid excise tax arrears, according to court filings.
The company’s application for creditor protection states that it is facing a “liquidity crisis” and would not be able to meet its obligations if it continues business as usual. BJK Holdings, the company’s senior secured lender, said it is no longer willing to continue supporting the company and demanded payment of its debt on April 1.
Prior to Tilray’s results, stock prices for larger Canadian producers had been on the rise in recent months after regulatory and international market news.
A legislative review of the Cannabis Act, published at the end of March, suggested the government is evaluating the way it calculates the excise tax rate, which would reduce the amount big companies pay on cannabis sales.
Meanwhile, valuations were boosted by developments in Germany’s legalization process, and optimism that the US federal government could soon ease restrictions.
Although Canadian companies cannot currently sell recreational cannabis outside the country, many have acquired or partnered with German and American companies to facilitate access to those markets in the future.
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