The chief executive of Aurora Cannabis Inc. trumpeted international medical pot markets as his company’s key to future growth as it reported a $75.1-million loss in its most recent quarter.
The Edmonton-based pot company is already dabbling in Israel, Australia and Europe, but believes the U.S. and many other regions have revenue-generating potential, if the wave of pot legalization continues around the globe.
“We expect a domino-like effect as acceptance grows,” said Miguel Martin, on a Thursday call with analysts.
“Where there is money to be made in a federally-regulated structure, Aurora will be there and we will win.”
Martin has spent recent quarters shaking his head at several trends that have emerged in the recreational cannabis industry.
He has labelled the recreational sector as “irrational” and “unsustainable” because companies are speeding to slash prices and margins in the quest for market share during a period when they’re still contending with COVID-19 pot store closures in some regions.
“You’re seeing core SKUs that are selling at a significantly negative gross margin. You’re seeing an exceptional amount of over inventory,” he said Thursday.
“And you’re seeing a situation like with Quebec right now, with the vaccine mandates, where you’re seeing a 16 to 20 per cent drop in sales, so it’s a weird market.”
Aurora has not been immune to the challenges. Its consumer cannabis net revenue fell 48 per cent to $14.8 million in its latest quarter from $28.5 million during the same time last year.
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Martin attributed some of that hit to wholesale cannabis the company sold at a low price point rather than destroying and to price compression and other pressures in the recreational market.
“The largest Canadian licensed producers are still finding it difficult to maintain market share, particularly in the recreational market,” Bill Kirk, executive director of MKM Partners research firm, wrote in a note ahead of Martin’s call.
“The largest manufacturers are having difficulty meeting Canadian recreational consumer needs either via an inability to grow the right product or a lack of understanding what the consumer wants.”
Kirk has doubts about Aurora’s medical cannabis plan because he said “international opportunities/profits are too lumpy to reliably expect” and “Canadian medical markets do not offer much surprise upside.”
However, Aurora’s medical cannabis business has had some recent gains. Its net revenue stemming from that part of the business amounted to $45.7 million, up 18 per cent from $38.8 million in the same quarter the year before.
Chief financial officer Glen Ibbott said on the same call that Aurora is encouraged by its medical business’s performance and is pleased to see recent growth in the number of union groups and insurers looking to help workers access cannabis.
Across all parts of its business, Aurora sold 14 per cent fewer kilograms of cannabis in the second quarter, while the average net selling price of dried pot excluding bulk sales dropped six per cent to $4.20 from $4.45 a year ago.
It also reported a $75.1 million loss for the period ended Dec. 31, which was an improvement from the $297.9 million loss it recorded during the same period the year prior.
Aurora says its basic and diluted loss per share for the quarter amounted to 38 cents compared with $1.77 in the second quarter of last year.
Net revenue for the quarter totalled $60.6 million, down 10 per cent from $67.6 million in the same period last year.
The company said it believes it will achieve the higher end of its targeted $60 to $80 million savings annually by the first half of fiscal 2023.