Aurora Cannabis sets more closures, selling Sun greenhouse at fraction of cost

Image of Aurora Cannabis' Sun facility

Aurora Cannabis' Sun facility in Medicine Hat, Alberta. (Photo courtesy of CNW Group/Aurora Cannabis)

In a bid to slash costs and become profitable, Aurora Cannabis is closing its flagship Aurora Sky facility in Edmonton, Alberta, as well as shuttering an outdoor farm in British Columbia and the company’s prized Anandia testing and genetics division.

The Edmonton-based producer also acknowledged the pending sale of its Sun facility in Medicine Hat, Alberta, for 47 million Canadian dollars ($36 million), well below the more than CA$250 million Aurora had put into the huge greenhouse. The deal has not yet closed.

Aurora disclosed the latest facility closures and sales last week, along with its third-quarter earnings, in which the company reported a loss of CA$1 billion ($780 million).

Aurora said the moves are part of a plan to save the company CA$150 million-CA$170 million in annualized costs by the first half of its next fiscal year.

“Simply put, our business is bigger than what we need, and we must position ourselves to better secure our path to profitability and ultimately be successful in this industry in the long term,” CEO Miguel Martin said in a video message to employees.

“Despite our best efforts, we are significantly over capacity and had to make the tough call to wind down operations at Sky.”

In the video, Miguel said consultants from Deloitte have been asked to ensure every decision the company makes is carefully reviewed and validated.

He said the new Aurora will be “leaner and more representative of the business we have today.”

In an emailed statement to MJBizDaily, an Aurora spokesperson said the company will continue to operate a corporate office in Edmonton despite the closure of the sky facility there.

“Aurora has made substantial improvements to our business as we work through the phases of our transformation plan, designed to deliver shareholder value, and secure Aurora’s future as a leading global cannabis company,” the spokesperson wrote. (The full statement is available below.)

“We remain the #1 Canadian licensed producer in global medical cannabis revenue, and we have achieved the higher end of our previously committed $60 (million)-$80 million annual savings.”

Latest casualties

The closure of the flagship Sky facility is a serious setback to Aurora after the company significantly overshot the production capacity needed to meet Canadian and international cannabis demand.

Aurora had invested heavily in the Sky greenhouse, spending as much as CA$150 million on the massive facility.

However, Aurora’s recreational cannabis sales fell drastically after 2019, partly contributing to the company’s decision to idle three quarters of the facility.

Aurora sold only 9,722 kilograms (21,433 pounds) of cannabis in the latest quarter.

In contrast, an Aurora said in a 2020 investor presentation that the company had a total production capacity of 150,000 kilograms annually – and a “funded capacity” that was significantly greater.

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In its earnings announcement, Aurora also disclosed the planned closure of the Anandia Laboratories research subsidiary.

In 2018, Aurora paid CA$115 million for the lab as part of an aggressive buying spree.

“We’re closing Anandia to focus on our core cannabis business and will move to third-party testing,” Martin explained in the video message.

Anandia is expected to close in June, and Sky will wind down in September.

Separately, Aurora confirmed the outdoor marijuana farm in Westwold, British Columbia, is being closed.

A former Aurora executive previously said the 200-acre farm in Westwold – about 400 kilometers (248 miles) northeast of Vancouver – was “one of the largest, if not the largest, licensed areas for cannabis production not just in Canada but in the world.”

In an emailed statement last week, Aurora told MJBizDaily it “no longer had a commercial need for the Valley site,” partly because of its recent acquisition of Thrive Cannabis, which has both indoor and outdoor grow facilities.

Danish, Canadian facilities sold 

The latest planned closures come as Aurora reached deals to sell some of its properties in Denmark, Canada and Uruguay.

In a regulatory filing last week, Aurora said it has reached a deal to sell the subsidiary that owns the massive Aurora Sun facility in Alberta.

Aurora listed the complex for sale last year.

The deal is worth CA$46.8 million, according to the filing, with CA$20 million due on closing and the rest payable within five years.

In an email to MJBizDaily on Monday, Aurora said the deal is not yet finalized and the company won’t have “further details until the transaction is complete.”

The deal is expected to close in the fourth quarter.

Aurora paused operations at the sprawling complex in 2020 after total spending exceeded CA$250 million.

The lower sale price is not unusual for Canadian cannabis greenhouses that were built in the 2018-20 era and which typically sell for significantly less than their original cost.

In 2020, for example, Aurora accepted an offer for a large greenhouse in Exeter, Ontario, for approximately half its CA$17 million listing price.

A Danish greenhouse was also sold recently.

Aurora said it received CA$7.5 million on March 15, 2022, for a production facility in Denmark dubbed Nordic 2.

The greenhouse in Odense, Denmark, was intended to be a 1 million-square-foot, fully automated cannabis production facility.

Aurora ceased construction at the facility in 2019.

The company still has a footprint in Denmark via its Nordic 1 site.

Aurora sold a number of other facilities earlier in the same fiscal year, including:

  • A production facility in Saskatchewan for net proceeds of CA$6.3 million.
  • A production facility in Cremona, Alberta, for net proceeds of CA$5 million

Aurora also said it sold equipment for proceeds of CA$200,000.

Shares of Aurora trade as ACB on the Toronto Stock Exchange and the Nasdaq.

AURORA CANNABIS STATEMENT

Aurora has made substantial improvements to our business as we work through the phases of our transformation plan, designed to deliver shareholder value, and secure Aurora’s future as a leading global cannabis company. We remain the #1 Canadian licensed producer in global medical cannabis revenue, and we have achieved the higher end of our previously committed $60 (million)-$80 million annual savings.

The company continues to make tough yet responsible changes to optimize our business. That is why Aurora announced the difficult decision to further streamline our operations with the closure of Aurora Sky in Edmonton. We will continue to operate a corporate office in Edmonton, and remain committed to the province and Canada. This decision was not taken lightly, and impacted employees will be fully supported by the company. We thank them for their valuable contributions and recognize the effect of these tough choices on them.

Also announced last week, the company has identified additional cost savings of $70 (million)-$90 million which support our path to profitability. Operating as a leaner, more agile organization fit for the state of our business and the global cannabis industry is imperative for Aurora’s future success. All Aurora employees will be supported as the company continues to transform.

We believe that cannabis growth over the next several years will centre on the international medical and recreational markets, and have seen early success in markets like Europe, Israel and Australia – our differentiators being Aurora’s roots in the medical industry, deep experience in federally regulated markets, and leadership in science and plant genetics.

We remain committed to providing our patients and consumers around the world high-quality, premium products to suit their needs.

Matt Lamers can be reached at mattl@mjbizdaily.com.