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Emerald Health Therapeutics Inc
Symbol EMH
Shares Issued 150,633,644
Close 2019-08-12 C$ 1.87
Market Cap C$ 281,684,914
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Emerald Health JV Pure Sunfarms earns $34-million in Q2

2019-08-13 01:58 ET - News Release

Mr. Riaz Bandali reports

EMERALD HEALTH THERAPEUTICS' PURE SUNFARMS JV REACHES Q2 SALES OF $32 MILLION, 78 per cent EBITDA MARGIN, $0.65/GRAM ALL-IN PRODUCTION COST, AND THIRD CONSECUTIVE QUARTER OF PROFITABILITY

Emerald Health Therapeutics Inc. has provided preliminary, unaudited financial results for the second quarter of 2019 for its 50-per-cent-owned joint venture, Pure Sunfarms (PSF), based in British Columbia. The company will report its complete financial results for the second quarter ended June 30, 2019, after market close on Aug. 28, 2019, and host its second quarter 2019 financial results conference call on Aug. 29, 2019, at 10:30 a.m. ET.

Pure Sunfarms' sales sequentially increased 125 per cent to $32-million. Net income, which includes a $20-million net gain attributable to changes in the valuation of biological assets, exceeded $34-million, representing a third consecutive quarter of profitability. EBITDA (earnings before interest, taxes, depreciation and amortization) was $25-million, resulting in an EBITDA margin of approximately 78 per cent, and net cash flow from operating activities exceeded $6-million. The operation achieved a gross margin of approximately 84 per cent before non-cash adjustments to the fair valuation of inventory and biological assets. All-in production cost was 65 cents per gram based on increased production volume and lower seasonal costs (for example, electricity). PSF sold approximately 8,000 kilograms of cannabis in the second quarter, and approximately 12,000 kilograms for the first half of the year.

"The second quarter financial results of our 50-per-cent-owned joint venture, Pure Sunfarms, reflects the progression of our vision and our collective ability to develop a premier cannabis operation," said Dr. Avtar Dhillon, executive chairman and president of Emerald. "We worked closely with our JV partner to design an ideal operating configuration. With continued optimization, and expansion under way to double overall output at Pure Sunfarms to approximately 150,000 kilograms annually, we anticipate significant growth in operating cash flow and the value of this asset to Emerald."

A key coming milestone is the expected amendment by Health Canada of Pure Sunfarms' processing licence for the first greenhouse, D3, which will allow Pure Sunfarms to commence direct sales of packaged cannabis products to provincial distribution channels. An additional key milestone scheduled to be reached by year-end is completion of the 65,000-square-foot GMP-(good manufacturing practice)-certified processing centre, including extraction. Concurrent with these steps and the substantial upward scaling of cultivation in D3, conversion of Pure Sunfarms' second greenhouse, D2, is under way, with the first harvest expected in mid-2020.

"Our joint venture, Pure Sunfarms, is setting a precedent in the Canadian cannabis industry with its pace of operational scaling, very low-cost production and impressive financial results despite reaching full-scale production just partway through the quarter," said Riaz Bandali, chief executive officer of Emerald. "PSF is achieving these results based on its efficient, large-scale quality production. While exceptional returns are being generated through bulk sales, we look forward to PSF obtaining Health Canada's approval to sell packaged products directly into provincial sales channels, which will enable PSF to broaden its business model and customer base.

"Emerald has purchased from PSF a volume of product sufficient to help meet its requirements for the recreational and medical market. As we continue to focus on building a unique product portfolio and scaling up our wholly owned cultivation, packaging and extraction capabilities, we will leverage our opportunity to purchase up to 40 per cent of Pure Sunfarms' production at a fixed price, per our agreement, as needed during the course of 2019. Emerald is excited about the success of the PSF model and its value as a core investment in Emerald's portfolio of operating assets."

Emerald's financial results for the second quarter ended June 30, 2019, which include the financial results of Pure Sunfarms on an equity basis, are in the final stages of completion and will be reviewed by the company's auditor prior to release to the public after market close on Aug. 28, 2019. The company will host a conference call on Aug. 29, 2019, at 10:30 a.m. ET.

To access the audio broadcast, please dial 866-652-5200 or on the Internet.

An archived version of the presentation will be available for 90 days on the investors section of Emerald's website.

About Emerald Health Therapeutics Inc.

Emerald Health Therapeutics is a Canadian licensed producer of cannabis products, with strategic initiatives focused on differentiated, value-added product development for medical and adult-use customers supported by novel intellectual property, large-scale cultivation, extraction and soft-gel encapsulation, as well as unique marketing and distribution channels. Its 50-per-cent-owned Pure Sunfarms operation in British Columbia has reached its full run-rate annual production of approximately 75,000 kilograms in its first 1.1-million-square-foot greenhouse Delta 3 operation, and its second 1.1-million-square-foot greenhouse is planned to be in full production by the end of 2020. Emerald's two wholly owned facilities in Quebec, a high-quality indoor growing and processing facility, and, in British Columbia, an organic greenhouse and outdoor operation, are completing construction and are working toward final licensing extension. Emerald has also contracted for approximately 1,200 acres of hemp annually in 2019 to 2022 with the objective of extracting low-cost CBD (cannabidiol).

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