NEWS BRIEF

Pure Sunfarms posts quarterly profit on surging marijuana revenue

Licensed cannabis producer Pure Sunfarms reported a significant jump in adult-use marijuana revenue for the three months ended June 30, further separating itself from most of its large-scale competitors with consistent sales growth, analysts said.

British Columbia-based Pure Sunfarms, a subsidiary of Village Farms International, booked net sales of $24.8 million (31.2 million Canadian dollars) for the second quarter, a 42% increase over the previous quarter’s sales of $17.5 million.

The quarterly revenue was roughly 160% higher than the same period one year earlier.

Pure Sunfarms’ net income for the quarter was $3.2 million, compared with a loss of $2.8 million for the three months ended March 31, 2021.

Adjusted EBITDA, a measure of profitability, for the second quarter was $7.4 million, a nearly 200% increase over the first quarter’s $2.5 million. The increase was driven by higher sales, gross margin and operating profit, according to the company.

“Many provinces began their COVID-19 re-opening plans as COVID-19 pressures began subsiding and capacity restrictions decreased, particularly in Ontario, which helped spur demand in the latter half of Q2 2021,” the company said in a regulatory filing.

In a note to clients, Andrew Partheniou, a GMP analyst with St. Louis-based investment banking firm Stifel, said Village Farms continues to outperform in the Canadian cannabis industry “with its fourth consecutive quarter of 20+% sequential (recreational) sales growth, setting itself apart from its peers, as it takes share in the (recreational) market and does so profitably.”

The increase in net sales from the first to the second quarter was helped by a 22% increase in Pure Sunfarms-branded sales and a 121% increase in unbranded sales.

The company attributed the increase in unbranded sales to its ability to fulfil demand from other licensed producers in the wholesale market for high-potency flower and trim.

Pure Sunfarms sells adult-use cannabis in five Canadian provinces: British Columbia, Ontario, Alberta, Saskatchewan and Manitoba.

Village Farms entered the U.S. hemp market in early 2019 by establishing the joint venture Village Fields Hemp USA for multistate outdoor hemp cultivation and cannabidiol extraction.

However, the company reported no hemp sales for the three months ended June 30, 2021.

The hemp business lost $86,000 in the second quarter.

Overseas, Village Farms sees “significant long-term potential” in nascent cannabis and CBD opportunities in the Asia-Pacific region.

Earlier this year, Village Farms increased its investment in Australia-based CBD platform Altum International Pty to just under 12%, representing “a capital efficient means for Village Farms to participate in opportunities in this region,” the company said in the same filing.

Cannabis is one of three revenue segments reported by Village Farms. The others are vegetable and energy production.

Besides cannabis, Village Farms reported $45.5 million in produce sales and $74,000 in energy sales.

Village Farms’ net loss for the second quarter was $4.5 million for all of its segments.

Shares of Village Farms International are traded as VFF on the Nasdaq and Toronto Stock Exchange, respectively.

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