Aurora Cannabis Inc. is on the hunt for more savings after wrapping a transformation plan that delivered at least $400 million in savings over the last three years.
The Edmonton-based cannabis producer said Wednesday that it wants to uncover another $40 million in savings by the end of next March, which marks the end of the company’s fiscal year.
“This incremental reduction puts us squarely on the path to reach our next financial milestone, which is positive free cash flow,” Miguel Martin announced on a call with analysts.
Free cash flow is an indicator of a company’s financial performance because it encapsulates money a company makes after accounting for expenses that support operations.
Profitability has been difficult across Canada’s cannabis industry, where a lack of demand, strict regulations and the strength of the illicit market have hampered the financial performance of most businesses. Many, including Aurora and its rivals, have resorted to layoffs, facility closures and intense evaluations of their product mix to weather such conditions.
Aurora, which has been pursuing sales in several European markets, recently decided to close its Nordic production facility in Denmark and rely on its Canadian facilities to supply the market.
The Canadian facilities have a lower per unit costs, higher quality and a much more reliable supply, chief financial officer Glen Ibbott said on the same call as Martin.
“We believe this change, in addition to reduced costs, will allow us to compete even more effectively in the growing European market, where we already have a substantial leadership position,” he said.
Across the entire business this fiscal year, he said Aurora was aiming to take away at least $5 million quarterly as less efficient operations are eliminated and at least another $5 million from cost reduction initiatives.
He also expects the company to save about $2 million per interest quarter in interest as it pays off the remainder of its convertible debt, which stands at about $80 million. Ibbot said Aurora intends to pay the debt off at the end of this fiscal year.
His remarks came as the company revealed its adjusted earnings before interest, taxes, depreciation and amortization totalled $310,000 for the quarter ended March 31 compared with a loss of $10 million a year earlier.
Net revenue totalled $64.0 million for what was the company’s third quarter, up from $50.4 million in the same quarter last year.
Aurora says medical cannabis revenue for the quarter totalled $38.0 million, down from $39.4 million, due to limited supply of high-demand products in certain European markets as the company had production issues at its Nordic production facility.
Consumer cannabis revenue amounted to $14.5 million, up from $10.3 million in the same quarter last year.
One of the company’s brights spots was Bevo Agtech Inc., a supplier of vegetable seedlings and flowers, which it acquired last year.
Aurora earned $10.8 million in plant propagation revenue from Bevo in the quarter, which Martin attributed to the seasonality of the business.
Bevo revenues, he explained, are highest in the late winter and spring months.