Village Farms' Canadian Cannabis Sales Grow

Despite higher prices, produce sales fall.

Village Farms International Inc. (Nasdaq: VFF) saw revenues slip during the first quarter ended March 31.

Village Farms reported that sales dropped 8% year-over-year to $64.7 million from $70.2 million. This missed the Yahoo Finance average analyst estimate for sales of $71 million.

The net loss was ($6.6 million), or ($0.06) per share, compared with ($6.5 million), or ($0.07) per share. The company also stated that the Pure Sunfarms revolving and nonrevolving credit facilities were extended to a maturity date of Feb. 7, 2026, under the same terms, conditions, and covenants as the original facilities maturing on Feb. 7, 2024.

“Canada continues to be an exceptionally difficult environment in which to operate a legal cannabis business profitably, most notably due to the absurd level of taxation relative to all other consumer products, including similarly regulated products like alcohol,” said CEO Michael DeGiglio. “The excessive, flat per-gram excise tax is handcuffing the very businesses that can ensure that this historical piece of Canadian legislation is a long-term success. At the same, it is enabling the illicit market to not only survive but flourish.”

Despite the taxation challenges, Village Farms reported its Canadian cannabis business delivered 40% year-over-year growth in retail branded sales for the first quarter, “significantly outpacing overall market growth,” DeGiglio added.

Cannabis Sales Increase

The cannabis business actually performed better than the company’s produce business. Total cannabis segment net sales increased 4% year-over-year to $30.1 million, representing 47% of total Village Farms’ sales.

Total cannabis segment net loss was ($0.5 million), compared to net income of $1.3 million a year ago. Canadian cannabis net sales increased 23% (on a constant currency basis) to a $25.1 million (C$34 million) from $21.8 million (C$27.6 million). U.S. cannabis net sales were $5.0 million, with gross margin of 65.1%, net loss of ($0.4 million) and adjusted EBITDA loss of ($0.1 million).

Produce Wilts

Village Farms’ produce segment produces, markets, and sells premium quality tomatoes, bell peppers ,and cucumbers. Fresh produce sales were $34.6 million compared with $41.3 million. The net loss for the group was ($2.6 million) compared with a year ago net loss of ($5.6 million).

The company said it started the sale process of its Monahans (Permian Basin, Texas) greenhouse facility and is expecting initial indications of interest in the second quarter of 2023.

The decrease in supply partner revenues is due to a decrease of (29%) in product volume, the decrease in volume is due to the loss of two large supply partner growers in late 2022.

The segment’s own greenhouse grown revenues increased 3.2% due to a 27% increase in our selling price, mostly offset by a decrease of 19% in pounds produced. The decrease of 19% in production pounds is due to a 15% decrease in planting area, of higher yielding commodity items.

The supply partner revenue decrease is due to lower volumes as follows: an (18%) decrease in tomato pounds sold, a (57%) decrease in pepper pounds sold, a (30%) decrease in cucumber pieces and a 50% increase in mini cucumber pounds.

The decrease in sales of ($6,782) or 16% was primarily due to a decrease in supply partner revenues of ($4,302). The average selling price for all produce sold, during the 2023 first quarter versus last year, increased as follows:

  • Tomatoes increased 13%.
  • Peppers increased 10%.
  • Cucumbers increased 77%.
  • Mini cucumbers increased 66%.

The price increases are due to both higher market pricing in early 2023 versus early 2022, as well as a higher percentage of VF Fresh sales going direct to retail accounts versus the first quarter of 2022.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor 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 Master's degree in Business Journalism from New York University.

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