Canadian mega-producer Cannara Biotech Inc. (TSXV: LOVE) (OTCQB: LOVFF) posted positive results that illustrate the company’s efficiency amid a crowded supply side market and pinching margins. The Québec-based operator released its fourth quarter and fiscal year 2022 financial results for the three-month and full year periods ending August 31.
Cannara reported C$12 million in revenue, an 84% increase versus the fourth quarter last year and a 19% rise from the previous quarter. The company brought in C$36 million worth of revenue for the 2022 fiscal year, a 108% increase rise versus 2021’s annual financials.
Cannara saw a net income of C$2.6 million for the fourth quarter and C$2.3 million for the 2022 fiscal year.
“This past year was a tremendous success, and I am very proud of the team at Cannara for their dedication, hard work and support as we continue to strive towards being one of the premier cannabis cultivators in the country,” said CEO and president Zohar Krivorot.
Cannara posted a gross profit before fair value adjustments of C$4.8 million, an increase of 38% versus the same time last year and a 27% increase from the previous quarter.
CFO Nicholas Sosiak touted the company’s sixth straight quarter of positive adjusted EBITDA, which came out to C$2.5 million, an 83% increase versus the fourth quarter last year. Adjusted EBITDA was C$5.3 million for the fiscal year 2022, a 254% rise vs fiscal year 2021.
“Revenues, profits, and net income have all increased over the past 12 months while simultaneously adding new products for our customer base and none of this would be possible without the hard work of the entire Cannara family,” said Sosiak. “Over the last twelve months, we have achieved a ramp-up in production which was necessary to support the recent expansion plans to the other provinces.”
The company said it moved around 26% more kilograms of cannabis since the previous period, with 2,570 kg or 730,000 units sold across 3 flagship brands during the fourth quarter.
The increase in production coming from the company’s new Valleyfield Facility, which came online by the second half of the year, provided a boon for the company, with the number of kgs sold rising by 69% versus the first half of the year.
Around 7,300 kg of cannabis or 2 million units sold during the fiscal year, an increase of approximately 1.5 million of units sold or 286% versus the fiscal year in 2021.
“Our state-of-the-art Valleyfield Facility is producing, as of today, seven of its twenty-four growing zones, each containing 9,600 plants each,” said Krivorot. We remain confident in fulfilling the remaining grow zones over the coming quarters, and our successful harvests should shed any doubt regarding our ability to achieve all of our expansion milestones and bring more premium-grade cannabis to market.”
Cannara said it has C$29 million in working capital as of August 31.
Taking it to the bank
The company said in December that it planned to optimize additional debt financing from CIBC to finalize the redesign of several zones at the Valleyfield Facility as a way to replicate the indoor cultivation environment, including growing without utilizing the sun and launching the operations at the site – all while leveraging Québec’s low electricity costs.
Following the report, the company intends to fashion its long-term goals with the help of a C$50 million credit facility secured by BMO Commercial Banking. The credit facility includes a three-year term loan for C$39.3 million with an accordion for up to an additional C$10 million, a C$5 million line of credit, and C$5.7 million for the issuance of a letter of credit. Funding was received after the quarter-end in May.
In June, Cannara used part of the C$39.3 million from that term loan to repay the existing C$21.8 million loan with CIBC and $5.7 million for the issuance of a letter of credit to cover certain deposit requirements. The company also granted a total of 600,000 stock options to employees and 613,333 stock options to consultants at an exercise price of C$0.18.
Sosiak said last quarter that the credit facility gives the company the “necessary liquidity” to continue its expansion, adding that the financial resources would help drive capital investment at the Valleyfield Facility and its cannabis supply in a way that allows the company to offer premium products “market-disrupting” price points.