Emerald Health Therapeutics, Inc. (OTCQX: EMHTF) reported preliminary, unaudited financial results for the second quarter of 2020 for its 41.3%-owned joint venture, Pure Sunfarms. Gross sales fell from C$32 million ($24 million) in the second quarter of 2019 to C$19 million ($14 million) in the second quarter of 2020. The company attributed the 40% decrease to a lower average selling price per gram of dried flower.
The net average selling price per gram of dried flower was 29% lower in the three months ended June 30, 2020, compared to the three months ended March 31, 2020.
While prices fell the cost of sales increased. The company blamed this on additional packaging and logistics costs associated with increased retail sales compared to the bulk wholesale model in 2019. The cost per gram sold for the second quarter was lower than the cost per gram in the first quarter of 2020, by 5%, even with the significant increase in retail sales quarter on quarter, which is a reflection of the increase in large format SKUs in the product mix and a lower cost of cultivation.
The breakdown in sales was 57% to provincial boards (flower) and 43% to the wholesale channel (flower and trim). This included nonmonetary transactions with extraction licensed producers in which Pure Sunfarms sold extraction grade dried flower and trim and purchased various forms of distillate from the same counterparties, which will be used in Pure Sunfarms’ future Cannabis 2.0 products.
“Pure Sunfarms’ leadership in low-cost production enables it to offer consumers high-quality cannabis products that are well-priced. This strong competitive positioning against both licensed and unlicensed producers has enabled it to achieve leading market share in Ontario and strong growth in other provinces,” said Riaz Bandali, President and Chief Executive Officer of Emerald. “With its broadening product mix, including forthcoming oils and Cannabis 2.0 products, we anticipate that Pure Sunfarms will continue to build on its competitiveness and accomplishments.”
Earlier this year Emerald Health entered into a settlement agreement Village Farms that settled their prior disputes over Pure Sunfarms. The result is that Village Farms will own 53.5% of Pure Sunfarms (PSF) and Emerald will own 46.5% of Pure Sunfarms. Originally this was a 50/50 joint venture, but then the two companies had a falling out.
Pure Sunfarms Sales For Village Farms
Village Farms (VFF) said its share of sales for Pure Sunfarms fell to $5.5 million for the most recent quarter from last year’s $15 million. It reported that the total Pure Sunfarm sales for the quarter were $14 million versus last year’s $24 million, a decline of 40%.
“The second quarter continues to demonstrate the earnings capacity of Pure Sunfarms as it delivered its sixth consecutive quarter of net income and seventh consecutive quarter of positive EBITDA,” said Michael DeGiglio , CEO Village Farms. “Although retail branded sales were level compared to the first quarter on a dollar basis, retail sales volume increased 89% as Pure Sunfarms’ continued to have great success with its large-format, value offerings, which have consistently ranked among the best-selling dried cannabis products with the Ontario Cannabis Store since launch.