Sales are up, but profits are on the decline for CannTrust Holdings Inc. (NYSE: CTST) as the company releases their financial results for the fourth quarter and year ending on December 31, 2018.
Revenue for the company increased to $16.2 million, representing an increase of 132% over the same quarter in the previous year. This rise in revenue was attributed to the start of recreational cannabis sales in Canada. However, some of those increased sales were offset by excise taxes on medical cannabis products; approximately $0.9 million.
“The CannTrust team has delivered remarkable growth in the fourth quarter of 2018. We achieved record sales volume, record revenue and our medical patient count continues to increase, reflecting the quality of our products and customer service,” said CannTrust CEO Peter Aceto.
In the fourth quarter, CannTrust sold 3,407 kilograms of cannabis, which is up from the 758 kilograms that the company sold in the same period in 2017. Over the last year, the company increased its active cannabis patient count from 37,000 to 58,000.
The company’s cash cost per gram declined by 42%, falling from $5.16 to $2.94. However, gross margins before fair value changes to biological assets also declined, falling from 69% in the third quarter to just 35%. Management has attributed the steep drop off to lower pricing on wholesale sales, excise taxes on medical cannabis sales, and the fact that the company is not yet operating at full production capacity.
Similarly, adjusted EBITDA declined as well; dropping from a loss of $0.9 million to a loss of $8.5 million. The company claims that the increased losses were a result of deliberate investments in support of growth efforts; such as marketing costs to launch four recreational cannabis brands, international strategy, personnel, and the costs associated with preparing the company to list its stock on the New York Stock Exchange.
Despite its losses, CannTrust still has 72.0 million in cash and short-term investments, and a working capital position of $111.6 million. CannTrust’s stock is currently trading at or around $8.30 per share.