Village Farms Sales Dip Slightly In Fourth Quarter

Total sales for 2022 rose by 30% to $293 million.

Village Farms International, Inc. (NASDAQ: VFF) announced its financial results for the fourth quarter and year ending December 31, 2022. Village Farms delivered revenue fell 5% to $69.5 million from last year’s $72.8 million. It just barely missed the Yahoo Finance average analyst estimate for revenue of $70 million. The company blamed the drop on a stronger U.S. dollar compared to the Canadian dollar decreasing reported U.S. sales for our Canadian Cannabis operations by ($2.4 million).

The company also reported a net loss of ($49.3 million), or ($0.54) per share, compared with a net income of $2.1 million, or $0.03 per share.  This also missed the Yahoo estimate for earnings of ($0.09). The company said that the net loss included an impairment of $13.5 million related to the acquisition of Balanced Health Botanicals, a write-down in the Canadian Cannabis business of $11.0 million (C$15.0 million) of lower potency flower inventory that was more than 12 months old, with the write-down partially attributable to lower pricing in the non-branded market, and provision for income taxes of $30.4 million. The decrease in net income was also attributed to reduced operating performance from VF Fresh and Canadian Cannabis, partially offset by higher operating profit from U.S. Cannabis for the three months ended September 30, 2022 as compared to September 30, 2021.

“The fourth quarter of 2022 once again demonstrated the momentum in our Canadian Cannabis business as investments in new brands and product innovations contributed to 25% year-over-year growth in retail branded sales and our 17th consecutive quarter of positive adjusted EBITDA,” said Michael DeGiglio, Chief Executive Officer, Village Farms. “We achieved a major milestone in 2022: Our Canadian Cannabis business became the number two top-selling cannabis company nationally1, growing market share sequentially every quarter during 2022. We have maintained this number two position in the first two months of 2023 despite distressed sales of biomass and ongoing promotional activity in certain parts of the Canadian market. Our strong brand recognition, innovation, and low-cost, consistent cultivation are a powerful combination in a market expected to grow steadily over the next three to five years.”

Full-year Results

Total sales in 2022 grew by 30% to $293 million from last year’s $268 million. For the full year of 2022, the net loss was $101 million versus last year’s net loss of $9 million.
For the full year, total cannabis segment net sales decreased (2.0%) year-over-year to $33.2 million, representing 47.9% of total Village Farms sales. On a positive note, Canadian cannabis net sales increased 13.1% to a $27.9 million (C$38.2 million) on a constant currency basis. Canadian cannabis retail branded sales increased 25% year-over-year (fourth quarter), and 25% for the full 2022 year. However, Canadian cannabis wholesale sales decreased (35%) due to continued significant erosion in market pricing as distressed producers liquidate inventories. The company reported $5.3 million in U.S. cannabis sales.
Still, Canadian cannabis cost of sales included an inventory write down of $11.0 million (C$15.0 million) of lower potency flower that was more than 12 months old, with the write down partially attributable to lower pricing in the non-branded market. Excluding the write-down, gross margin for Canadian Cannabis was 40%, consistent with its stated target range of 30% to 40%.

DeGiglio added, “During 2023, we expect strong commercial execution, continuous innovation and sales to export markets will deliver another year of market-leading results in our Canadian Cannabis business. At the same time, we are focused on continued gains in production efficiencies and expense improvements. In our U.S. Cannabis business, Balanced Health Botanicals continues to perform well in a challenging consumer market for CBD, based on its leading CBDistillery® brand and innovative product introductions, including the strong performance of its hemp-derived THC Synergy+ line of products. This, combined with prudent cost management, drove positive EBITDA for our U.S. Cannabis business for the fourth quarter.”

Produce

Switching over to produce, Village Farms reported sales of $36.2 million compared with $38.4, primarily due to a smaller growing area in Texas in the fourth quarter of 2022, lower production from its Canadian tomato greenhouse due to the Brown Rugose virus in the fourth quarter of 2022 and lower third-party supplier volume in the fourth quarter of 2022 due to loss of some contracts in late 2022 that have been replaced in 2023 with new growers.

 

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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