Aphria’s record Canadian cannabis sales marred by weak EU revenue

Strong demand in Canada for Aphria’s recreational marijuana products failed to offset disappointing international revenue in the Leamington, Ontario-based company’s first fiscal quarter.

The Canadian producer’s net revenue declined 4.5% from the March-May period to 145.7 million Canadian dollars ($110 million), well below analyst expectations.

In the highly competitive European market, Aphria’s net revenue declined substantially compared to one year ago, falling 16% to CA$80.7 million for the three months ended Aug. 31.

Large Canadian cannabis companies have long touted the global opportunity for medical marijuana businesses, citing multibillion-dollar projections that significantly differ from today’s sales.

In North America, net revenue more than doubled over last year’s first quarter, to CA$63.5 million.

In Canada, Aphria reported record gross revenue from adult-use cannabis of CA$69.6 million, up 23% from the previous quarter.

Revenue from medical cannabis products was CA$7.9 million, down from the previous quarter’s CA$8.4 million.

Net revenue in Latin America fell to CA$1.5 million.

The company continued to deliver positive adjusted EBITDA – still a rarity among large Canadian publicly traded cannabis companies.

Adjusted EBITDA increased 16% over the previous quarter to CA$10 million.

Aphria’s inventory far outpaces sales.

In the quarter, Aphria said it sold 17,303 kilograms (19.1 tons) of dried cannabis, 1,792 kilograms equivalent of cannabis oil products and 1,786.9 kilograms of cannabis vape oils.

However, the company’s inventory includes:

  • 74,996 kilograms of cannabis, up from 50,205 kilograms in May.
  • 32,487 kilograms of trim, about double compared to what it held in May.
  • 120,420 liters of cannabis oils, slightly lower than May’s inventory.

In a conference call with analysts, Chief Financial Officer Carl Merton said Aphria temporarily reduced cannabis production at its flagship facility in Leamington, “focusing the reduction on our operating facility with the higher of our two cost structures.”

The reduction in capacity did not impact harvests until September, he said, so it had no impact on the first quarter.

CEO Irwin Simon said he expects the company’s facility in Germany will be completed in the coming months.

The CEO also repeated his opinion, without citing evidence, that Germany could be the first country in the European Union to legalize recreational cannabis.

Aphria ended the quarter with CA$400 million in cash.

On the call, Simon said the money could be used to “fuel future planned growth in Canada and internationally.”

He said such flexibility allows the company to pursue M&A activity “if and when we believe there is an opportunity to further enhance our shareholder value.”

Aphria trades as APHA on the Toronto Stock Exchange.

In June, the company moved its U.S. listing from the New York Stock Exchange to the Nasdaq, where it also trades as APHA.

Earnings details from some publicly traded companies in the cannabis industry are available here.

Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at mattl@mjbizdaily.com.