Mr. Riaz Bandali reports
EMERALD HEALTH THERAPEUTICS' JOINT VENTURE, PURE SUNFARMS, REPORTS POSITIVE OPERATING AND FINANCIAL GROWTH IN 2019, WITH SIGNIFICANT EBITDA PERFORMANCE OF $54.1 MILLION
Emerald Health Therapeutics Inc. has provided audited financial results for the fourth quarter and year of 2019 for its British Columbia-based joint venture, Pure Sunfarms (PSF).
All comparable figures are for the year and quarter ended Dec. 31, 2018.
- Net sales, consisting entirely of dried cannabis, for the year and fourth quarter of 2019 were $82.8-million and $12.1-million, respectively, compared with $4.9-million and $4.7-million.
- All-in cost of cultivation (including depreciation) for the year was 78 cents per gram and for the fourth quarter was 66 cents per gram.
- Gross margin (before non-cash adjustments to the fair value of inventory and biological assets and inventory impairment) for the year and fourth quarter was 76 per cent and 83 per cent compared with 69 per cent and 71 per cent.
- Selling, general and administrative expenses for the year and fourth quarter were $10.4-million and $3.0-million compared with $3.4-million and $1.3-million.
- EBITDA (earnings before interest, taxes, depreciation and amortization) for 2019 was $54.1-million, resulting in an EBITDA margin of 65 per cent, compared with nil in 2018.
- EBITDA in the fourth quarter of 2019 was $6.9-million, an EBITDA margin of 57 per cent, compared with $2.1-million in the fourth quarter of 2018, an EBITDA margin of 44 per cent.
Sales and operating highlights
- Pure Sunfarms sold approximately 26,000 kilograms of flower and trim in 2019 at an average price of approximately $2.90 per gram. Roughly 92 per cent of 2019 sales were to the bulk wholesale channel and 8 per cent to the branded retail channel. Fourth quarter sales were over 1,100 kilograms averaging over $3.59 (Canadian) per gram. During the fourth quarter, all cannabis sales were branded retail sales to provincial distribution boards and for the most part represented replenishment orders during the quarter.
- PSF recognized revenue of $8.1-million upon the completion of the settlement agreement with Emerald in Q4.
- Two of the three significant initial retail shipments to provincial boards occurred before and after the fourth quarter.
- PSF expanded its distribution to Alberta in Q1 2020, thereby increasing its market presence to three of Canada's four most populous provinces (also including Ontario and British Columbia) or nearly two-thirds of the Canadian recreational cannabis market (by population).
- PSF remained the top-selling brand of dried flower with the Ontario Cannabis Store by both dollars sold and kilograms sold year to date ended Feb. 29, 2020, achieving a 13.5-per-cent market share (by kilograms sold), with two of the top four dried cannabis products by both dollars sold and kilograms sold, and the top-selling dried cannabis product by both dollars sold and kilograms sold.
- It continues to work toward distribution opportunities in other provinces.
- PSF just recently launched a new large-format 28-gram (one ounce) package.
- It received approval from Health Canada to operate the final components of its 65,000-square-foot, state-of-the-art processing centre located within the 1.1-million-square-foot Delta 3 greenhouse facility. The expanded processing area will enable PSF to generate additional production cost-efficiencies, further elevate the quality of its products, expand its product offerings and increase its processing throughput. The processing centre includes an extraction area that will have processing capacity of 35,000 kilograms of biomass annually. The new area has been designed to satisfy European Union GMP (good manufacturing practice) compliance and certification, which Pure Sunfarms is currently pursuing.
- PSF continues to prepare for the introduction of new product forms under cannabis 2.0, expected to commence in the second half of this year.
"In the first full year of legal recreational cannabis sales in Canada, our Pure Sunfarms joint venture achieved stellar outcomes in operations, sales as well as financial performance," said Riaz Bandali, president and chief executive officer, Emerald Health Therapeutics. "PSF continues to set standards for cultivation efficiency and overall operating costs in the sector and has demonstrated an ability to deliver a compelling product and value proposition to consumers and other licensed producers.
"We are proud of PSF's success and pleased that we continue to be a significant partner in this tremendous company. We are also very pleased with the licensing and scale-up into production of our two wholly owned cultivation facilities in Richmond, B.C., and St. Eustache, Que., which now serve as our source of cannabis supply for our product development efforts as well as for our medical and recreational customers. These two facilities, along with our position in PSF, provide Emerald with three distinct operating assets producing differentiated and complementary products to serve the market."
About Emerald Health Therapeutics Inc.
Emerald Health Therapeutics is committed to cutting-edge cannabis science to create new consumer experiences with distinct recreational, medical and wellness-oriented cannabis and non-cannabis products.
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