Village Farms Archives - Green Market Report

Debra BorchardtDebra BorchardtMarch 16, 2021
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4min4080

Village Farms International, Inc.  (NASDAQ: VFF) announced its financial results for the three months and year ended December 31, 2020. Sales increased 43% to $47.4 million for the quarter versus last year’s $33.1 million for the same time period. The net income rose 197% from ($7.2) million to $7.0 million in the quarter. Village Farms delivered earnings per share were $0.12, which beat expectations by ten cents. Investors though seemed unimpressed and the stock was sold off by over 9% in early trading to lately trade at $15.82.

For the full year, sales grew 18% to $170.1 million over 2019’s sales of $144.6 million. Net income rose 404% to $11.6 million in 2020 versus 2019’s net income of $2.3 million. The earnings per share for the year were $0.20. The company noted that “on December 31, 2020, Village Farms owned 100% of Pure Sunfarms Corp., as the full acquisition of the remaining interest in Pure Sunfarms occurred November 2, 2020. Accordingly, for the 60-day period from November 2 to December 31, 2020, Pure Sunfarms’ financial results are consolidated with Village Farms results for both the fourth quarter and year ended December 31, 2020.”

“The fourth quarter was a solid finish to a year of significant achievement for Village Farms and our wholly-owned Canadian cannabis subsidiary, Pure Sunfarms, which saw great success as it transitioned its focus to retail branded sales from nearly all sales in 2019 being non-branded, mainly to other producers,” said Michael DeGiglio, CEO, Village Farms. “Following a 40% sequential increase from the second to the third quarter of 2020, Pure Sunfarms sales of branded retail products to provincial distributors increased another 28% sequentially from the third to the fourth quarter, as our branded dried flower products continued to be the top seller with the Ontario Cannabis Store, and our first Cannabis 2.0 products were well received by consumers. This contributed to our ninth consecutive quarter of profitability, even as we invested during the quarter to support our future growth.”

“Finally, alongside the momentum at Pure Sunfarms, our produce business had a strong 2020, driven by higher pricing amidst elevated demand across our national and regional grocer and “big box” customers for much of the year. Our significant progress over the last two years in transitioning capacity designated for cannabis to growing partners enabled us to take full advantage of these market dynamics, coupled with year on year improvements at our Texas green house facilities, drove a $16.5 million year over-year improvement in Adjusted EBITDA to support our longer-term growth opportunities in cannabis.”

In January Village Farms entered into definitive agreements with certain institutional investors for the purchase and sale of an aggregate of 10,887,097 common shares in a registered direct offering, for expected gross proceeds of approximately $135 million (approximately CAD$171 million ). The company sold the shares at $12.40 (approximately CAD$15.70 ).

 


Debra BorchardtDebra BorchardtJanuary 15, 2021
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4min4720

Village Farms International, Inc. (NASDAQ: VFF) (TSX: VFF) has entered into definitive agreements with certain institutional investors for the purchase and sale of an aggregate of 10,887,097 common shares in a registered direct offering, for expected gross proceeds of approximately $135 million (approximately CAD$171 million ). The company sold the shares at $12.40 (approximately CAD$15.70 ). The closing is expected to be on or about January 20, 2021. Village Farms said the net proceeds will be used for general working capital purposes.

The stock was dropping in early trading on the news but was lately selling at $14.35, not too far from the company’s 52-week high of $15.05.

The Road To Owning Pure Sunfarms

In March of 2020, Village Farms and Emerald Health Therapeutics (TSXV: EMH)(OTCQX: EMHTF) said that they had entered into a settlement agreement that would settle their prior disputes. The result was that Village Farms would own 53.5% of Pure Sunfarms (PSF) and Emerald would own 46.5% of Pure Sunfarms. Originally this was a 50/50 joint venture, but then the two companies had a falling out. Then on November 2, 2020 (subsequent to quarter-end), the company acquired all issued and outstanding shares of Pure Sunfarms, as a result of which Village Farms owned 100% of Pure Sunfarms.

On November 23, the company announced that Pure Sunfarms had received from Health Canada its Cannabis Research License to conduct human administration trials for sensory evaluation of cannabis, enabling it to engage in on-site assessments of the taste, sight, smell, or touch of its products at its Delta 3 cannabis facility in Delta, British Columbia.

“This license provides us with significant new opportunities in the formulation and refinement of our products, and underscores our commitment to innovation and the advancement of the Canadian cannabis consumer experience,” said Mandesh Dosanjh, President and Chief Executive Officer, Pure Sunfarms. “We look forward to leveraging this new capability to continue to extend Pure Sunfarms’ product leadership and further strengthen what is already one of Canada’s best-selling cannabis brands.”

Net income for the nine months ending September 30, 2020, included a $4.7 million gain on receipt of Pure Sunfarms shares from Emerald Health Therapeutics as per the Settlement Agreement and Mutual Release, dated March 2, 2020, by and between Village Farms International, Inc., Emerald Health Therapeutics Inc., Emerald Health Therapeutics Canada Inc., and Pure Sunfarms Corp.

 


Debra BorchardtDebra BorchardtAugust 13, 2020
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4min7110

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.


Debra BorchardtDebra BorchardtMarch 3, 2020
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4min13580

 Village Farms International, Inc. (TSX: VFF)(NASDAQ:VFF) and Emerald Health Therapeutics (TSXV: EMH)(OTCQX: EMHTF) said that they have entered into a settlement agreement that will settle their prior disputes. 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.

Original Deal

Last year, Emerald said it had contributed over $37.4 million in equity investment in the D3 & D2 greenhouse operations for the Pure Sunfarms joint venture. In addition, it provided $13 million in an interest-bearing loan and purchased over $20.5 million of cannabis as per the terms of its supply agreement with PSF.  On November 1, 2019, Emerald notified PSF that it has decided to set-off the $5.94 million payment owed by Emerald to PSF against a portion of PSF’s debt under Emerald’s $13.0 million principal amount shareholder loan.

Village Farms then advanced $5.94 million to PSF for additional equity. Village Farms claims that it has the right to acquire these shares under the PSF shareholders’ agreement. At the time Riaz Bandali, President and CEO of Emerald said, “We were shocked to receive this notice. We can’t speculate on Village Farms’ motivation for making this irresponsible and inaccurate claim, but we want to reassure investors that there has been no change in ownership of PSF. We are disappointed at the aggressive approach of Village Farms in this matter; however, we continue to believe that cooler heads will prevail. Until then we will assertively defend our rights on behalf of our shareholders in the face of these unwarranted actions by Village Farms.”

Settlement

Emerald’s $5.94 million equity contribution that it opted to not make is now canceled. It is waiving repayment of the $13 million loan and instead will issue a  promissory note to Pure Sunfarms in the amount of C$952,237. Village Farms has made an additional equity contribution to Pure Sunfarms of C$8.0 million in 2020.

In addition, Emerald had the provision to purchase 40% of Pure Sunfarms’ aggregate production in 2018 and 2019 and they are now released from that. Pure Sunfarms and Emerald will release each other from their current supply agreement under which Emerald has the provision to purchase 25% of Pure Sunfarms’ aggregate cannabis production from the Delta facilities in 2020, 2021 and 2022.

Emerald will transfer 2.5% of additional equity in Pure Sunfarms to Village Farms. Village Farms is one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada. Village Farms produces and distributes fresh, premium-quality produce with consistency 365 days a year to national grocers in the U.S. and Canada from more than nine million square feet of Controlled Environment Agriculture (CEA) greenhouses in British Columbia and Texas, as well as from its partner greenhouses in British ColumbiaOntario, and Mexico. Sunfarms Corp. is one of the single largest cannabis growing operations in the world.

 

 



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