Organigram Stock Lifts On Solid Third Quarter Earnings

Canadian-based Organigram Holdings Inc. (OGRMF) stock rose over 2% to approximately $3.43 after the cannabis delivered solid results for its fiscal third quarter. The company reported sales of C$3.7 million for the fiscal third quarter versus last year’s C$1.9 million in the same time period.  The company also reported net income of C$2.8 million for a sequential increase of 162% compared to $1.1 million in the second quarter. This easily topped last year’s third-quarter loss of $C2.3 million.

“Our fiscal third quarter was transformational for the Company,” read the company statement. “Our production capabilities have increased exponentially, we launched our adult recreational brand strategy and have signed agreements with a number of provinces and private retailers as well as announcing key significant investments from both a strategic and international perspective. As we head into the launch of the adult use recreational market we believe Organigram is well positioned to build upon its domestic medical business into becoming a national player in the adult recreational market and a global player in the medical market.”

The company’s cultivation the cost per gram for dried flower came in at C$0.80 per gram “all-in” which includes direct labor and materials, allocated overhead and depreciation. Excluding depreciation, the cost was C$0.58 /gram.

Organigram reported that its cannabis oil sales volume increased 39% sequentially to 768,400 milliliters from the second quarter and jumped 452% over last year’s third quarter. The sales volume for dried flower increased 28% sequentially from the second quarter to 303,428 grams and rose 55% over last year’s 196,129 grams.

The company is in solid financial position with $156 million in cash and short-term investments (up from $34 million at the August 31, 2017 year-end). Still, there is $98 million in long-term debt and convertible debentures.

Last week, Echelon Wealth Partners initiated coverage on Organigram with a speculative buy rating and a $7 price target.

 

Looking Ahead

The company said that its Phase 4a (26 grow rooms) and 4b (27 grow rooms) construction expansions began in Q4 including a substantially complete 40-megawatt (peak capacity) substation worth $4 million – total cost of Phases 4a and 4b (including the $4 million spent on the substation) estimated to be $70 million bringing target production capacity to 89,000 kg/annum. Phase 4c (24 grow rooms) which has an estimated cost of $40 million would bring target production capacity to 113,000 – construction scheduled to begin in January 2019.

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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