Hexo Corp. has completed the sale of the Niagara, Ontario-based cultivation facility it acquired as part of a 263 million Canadian dollar ($193 million) deal to buy Newstrike Brands last year.
The sale of the greenhouse fetched approximately CA$10.25 million.
The decision to sell the facility was made in early March, according to Hexo.
A news release attributed the decision to “an excess of cultivation capacity in the market and estimated forecast demand for cannabis products, as result of slower than expected market development.”
Hexo’s Canadian peers have also been abandoning costly cannabis greenhouses in recent months:
- Canopy Growth recently closed two British Columbia greenhouses.
- Aurora Cannabis sold an Ontario greenhouse at a discount.
- Tilray closed an Ontario facility.
Hexo plans to put the proceeds from the sale towards expanding its facility in Belleville, Ontario, “and for working capital and other general corporate purposes.”
Hexo recently posted a second-quarter net loss of CA$298.2 million.
Stay Informed
Why are you using Hexo’s one- time, non reoccurring, second quarter net loss numbers in this story when the Q3 earnings are published?
“Q3 demonstrated significant improvement in a number of different ways as we move to closer to our goal of becoming adjusted EBITDA positive. On the revenue front, revenue from sales in the quarter increased by CAD7.1 million or 30% to CAD30.1 million from CAD23.8 million in Q2. Total revenue from sales in the quarter increased by CAD15 million or 94% when compared to the third quarter of the previous year. Net revenue increased to CAD22.1 million from CAD17 million in Q2 and from CAD13 million in Q3 2019.
Gross revenue from the adult-use channel was CAD29.8 million and that represents an increase of 30% from the previous quarter two sales of CAD23 million. Gross adult-use use sales also increased by 104% when compared to the same period in 2019.”
https://www.fool.com/earnings/call-transcripts/2020/06/11/hexo-corp-hexo-q3-2020-earnings-call-transcript.aspx