Labor Shortage Causes Aphria to Report Loss in Gross Profit Margin

Leamington, Ontario based Licenced Producer Aphria (APHQF) is reporting a solid start to the fiscal year 2019, and a 35% increase in grams sold in Q1-2018, despite some recent labor pool-related setbacks that resulted in a “rebalancing of inventory”.

Aphria reported revenue for the three months ending August 31, 2018, at C$13.2 million, representing a 10% increase over the prior quarter’s revenue of C$12 million and a 117% increase over the same period of 2017, which was C$6.1 million. They attribute this growth in revenue to an increase of wholesale orders and 100kgs of dried cannabis and cannabis oil that was sold to third-parties for clinical trial purposes.

Not all reports by Aphria were positive, showing a loss in the first quarter of 2019 due to a labor shortage in Leamington, Ontario. The first quarter of 2019 saw an adjusted gross margin of 63.6%, with an adjusted gross profit of C$8.4 million, compared to C$9.4 million with an adjusted gross margin of 78.7% in the prior quarter.

During this period, Aphria had to make the decision to dispose of 13,642 plants prior to harvest due to a “lack of qualified local labor”, leading one week’s crop rotation in the Aphria One greenhouse to outgrow its optimal harvest period. Without labor to harvest the plants, the company made the tough call to dispose of the affected plants to ensure that the next week’s harvest would be grown in optimal conditions.

Aphria acknowledges that had this loss not occurred, the gross profit margin would have been higher. This incident prompted Aphria to go on a hiring streak, doubling their greenhouse staff for their planned expansion to be fully operational by the end of Q2-2019.

Net income for the three months ending August 21, 2018 was C$21 million or C$0.09 per share as opposed to C$15 million or C$0.11 per share in the prior year, with the company attributing this increase to their long-term investment portfolio, including their investments in Liberty Health Sciences and Hiku Brands Company Ltd, as well as an increase in value of biological assets as a result of expansion projects.

Earlier this week, Aphria was in the news as rumors that tobacco giants Altria (makers of Marlboro cigarettes) were in talks with Aphria for a partnership, which Aphria later denied. “That there is no agreement, understanding or arrangement in place with a potential investor at this time. Aphria will advise the investment community of any material changes, if and when they occur, in accordance with applicable disclosure requirements,” they said in a statement.

This morning, Aphria invited those interested to attend a conference call, for which an audio replay will be available until November 9. For more information visit www.aphria.ca.

 

Anne-Marie Fischer

Anne-Marie Fischer

Anne-Marie Fischer is a cannabis educator and writer, engaged with cannabis brands and organizations across the globe. After serving the United States and global cannabis industries, she has recently returned home to Canada to serve the legal cannabis industry with education and engaging content.


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