NEWS BRIEF

Report: Canadian cannabis firms received millions in pandemic subsidies

Cannabis businesses in Canada benefited from millions of dollars in pandemic-related subsidies from the federal government, according to research by the publication The Deep Dive and verified by Marijuana Business Daily.

Other businesses tapped into interest-free loans, as well as lending offered by agricultural lender Farm Credit Canada (FCC), according to financial statements.

At least 18 cannabis businesses, ranging from producers to extractors, collected more than 25 million Canadian dollars ($19 million) from the federal government’s Canada Emergency Wage Subsidy (CEWS) program so far.

The CEWS program provides a 75% wage subsidy for businesses suffering a decrease in revenues and was originally retroactive to March 15.

The government has signaled it plans to extend CEWS to next summer.

In April, MJBizDaily reported that the subsidy could potentially benefit cannabis firms of all sizes, depending on their financial situations.

George Smitherman, CEO of industry group Cannabis Council of Canada, said marijuana businesses accessing CEWS “is encouraging evidence of companies responding to the remarkable challenges of COVID-19.”

“Preserving employment during a period of rapidly increasing operating costs was the objective and result of the Wage Subsidy Program,” he added.

Canadian retail sales of adult-use cannabis reached a record of CA$256 million in September, implying an annualized market worth approximately CA$3 billion.

Despite that, many Canadian producers have lost considerable amounts of money in recent quarters, mostly stemming from missteps such as:

Most regulated cannabis companies benefiting from the CEWS program have reported only through June, so the overall figure will rise in the coming months with more financial disclosures.

The figures are taken from regulatory filings for publicly traded companies, so the total amount does not reflect any subsidy received by privately owned cannabis businesses.

The top recipient of the CEWS program so far this year was struggling Vancouver, British Columbia-based producer Zenabis.

Zenabis received almost CA$6 million in government subsidies as of Sept. 30, according to a financial disclosure. The company recorded a net loss of CA$30.4 million so far this year.

Another producer, Sundial, received CA$4.1 million.

“The company became eligible for the CEWS based on decreases in revenue during the three months ended June 30, 2020, and has received the subsidy for the periods June 6 to July 4, 2020; July 5 to August 1, 2020; August 2 to August 29, 2020; and August 30 to September 26, 2020,” Sundial noted in a regulatory filing.

Sundial saw a net loss of CA$142 million through the nine months ended Sept. 30.

The federal government also provides lending via Farm Credit Canada.

Cannabis producer Canopy Growth increased its revolving lines of credit with Farm Credit Canada to CA$40 million this year, up from CA$6 million in 2019.

It’s not known whether that capital came from the agency’s pre-pandemic portfolio or the emergency pandemic-related capacity offered to FCC by the federal government.

FCC’s loan to Canopy accounted for almost a third of its cannabis sector exposure.

The Crown corporation’s lending to the marijuana industry sat at around CA$140 million as of September, which accounted for 0.24% of its entire portfolio, MJBizDaily previously reported.

Separately, Adastra Labs Holdings and Nextleaf Solutions both disclosed small loans from the Canadian government.

Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at [email protected].

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