Ms. Jenn Hepburn reports
EMERALD HEALTH THERAPEUTICS REPORTS PURE SUNFARMS FIRST QUARTER 2020 FINANCIAL RESULTS
Emerald Health Therapeutics Inc. has provided preliminary, unaudited financial results for the first quarter of 2020 for its 41.3-per-cent-owned joint venture, Pure Sunfarms.
During the three months ended March 31, 2020, Pure Sunfarms made important strides in growing its cannabis retail sales to provincial distributors, increasing revenue and volume in the retail market by 118 per cent and 179 per cent, respectively, over the fourth quarter of 2019. It continued to build market share in Ontario through the end of April, introduced competitive new product formats and added new provincial markets in its continuing market expansion effort. In achieving these steps, Pure Sunfarms achieved its fifth consecutive quarter of net income and sixth consecutive quarter of positive EBITDA (earnings before interest, taxes, depreciation and amortization).
"We are pleased to see Pure Sunfarms continue to demonstrate solid traction in its transition into the retail market," said Riaz Bandali, president and chief executive officer of Emerald. "The Pure Sunfarms team is also to be commended for their fifth consecutive quarter of profitability, which place it in a very unique and enviable position in the sector."
PURE SUNFARMS' FINANCIAL SUMMARY
First quarter ended March 31, 2020
(millions of dollars, excluding cost of cultivation)
Total gross sales $21.5 $14.4
Total net sales $18.0 $14.4
Gross profit $9.4 $9.3
Gross margin 52% 60%
SG&A $3.3 $1.3
EBITDA $6.7 $8.6
EBITDA margin 37% 60%
Cultivation $/gram (incl. depreciation) $0.88 $1.38
Sales for Q1 2020 consisted of approximately 10,365 kilograms of flower and trim at an average sales price of $1.74 per gram, compared with Q1 2019 sales of approximately 4,140 kilograms of flower and trim at an average sales price of $3.47 per gram.
Sales of branded retail products to provincial cannabis distribution boards in Q1 2020 totalled 3,065 kilograms at an average price of $2.80, compared with nil in Q1 2019 when all Pure Sunfarms sales were bulk cannabis sold in the wholesale channel. Sales to provincial boards in Q1 2020 increased 118 per cent from Q4 2019, largely a result of the initial shipments for the launch and sale of product in Alberta.
The lower unit cultivation cost, including depreciation, of 88 cents per gram in Q1 2020 compared with $1.38 per gram in Q1 2019 was driven by full-scale operations in 2020 versus operations that were still scaling up in 2019, providing better efficiencies and economies of scale, as well as more experience growing cannabis in the Delta 3 facility. The cultivation cost in Q1 2020 was higher than the 78 cents per gram in Q4 2019 due to incremental use and cost of power to run the operations, including supplemental lighting.
Quarterly selling, general and administrative expenses increased 153 per cent year over year to $3.3-million from $1.3-million primarily due to investments in retail sales, marketing and staffing.
Income, net of fair value adjustments in Q1 2020 of $8.6-million, included the recognition of a $6.0-million gain related to the settlement agreement dated March 2, 2020, that resolved all disputes between Emerald, Pure Sunfarms and Village Farms.
Remained the top-selling brand of dried flower with the Ontario Cannabis Store (OCS) by both dollars sold and kilograms sold. In the month of April, Pure Sunfarms increased its market share (by kilograms sold) to 20.4 per cent, bringing its overall year-to-date (ended April 30) market share (by kilograms sold) to 14.3 per cent. For the year-to-date period, Pure Sunfarms had two of the top-four dried cannabis products (by kilograms sold) and the top-selling dried cannabis product (by dollars sold) (1);
In late February, launched its branded retail dried cannabis products in Alberta, which ranks as the second-largest province for cannabis sales and has the second-highest per capita cannabis sales of the five largest provinces by sales (2);
Launched its first large-format 28-gram (one-ounce) high-quality offering (indica variety) in British Columbia (March) and Ontario and Alberta (April), which became the top-selling dried cannabis product by both dollars and kilograms sold with the OCS in April and generated a record sales volume (by kilograms) for a single product during a one-week period in the dried flower category with the OCS6;
Launched a new sativa variety of the 28-gram (one-ounce) large-format offering;
Launched a new 14-gram (half-ounce) large-format offering;
Received approval from the Saskatchewan Liquor and Gaming Authority to supply cannabis to the province's private retail market, and is preparing to commence shipping as soon as possible. Saskatchewan ranks as the fifth-largest province by cannabis sales, comprising more than 6 per cent of total Canadian sales, and has the highest per capita cannabis sales of the five largest provinces by sales (2);
Continued to prepare for the launch of cannabis oil products and new product forms under cannabis 2.0, which are planned for the summer of this year.
(1) Data cited have been calculated by Pure Sunfarms from sales information provided by OCS.
(2) Statistics Canada. Last 12 months ended Feb. 29, 2020.
Pure Sunfarms' facilities in Canada remain open and operational. Pure Sunfarms already adheres to the highest health and safety standards in its operations and has put in place heightened hygiene practices and safety protocols, including more stringent cleaning and sanitization, and is taking appropriate precautions throughout all operations as per the recommendations of health authorities. Pure Sunfarms will continue to enhance and evolve such practices and protocols as the situation warrants.
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. With an emphasis on innovation and production excellence, Emerald's three distinct operating assets are designed to uniquely serve the Canadian marketplace and international opportunities.
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