Under the cover of darkness Zenabis Global Inc. (TSX:ZENA) delivered its earnings in Canadian dollars. It was 1 am when Zenabis issued its press release reported that its 2019 net revenue was $66.5 million, while its net loss for the year was $127 million or $0.53 per share.
The net revenue did increase 850% over 2018’s $7 million, the net loss for 2019 ballooned from 2018’s net loss of $32.5 million or $0.22 per share. The net losses included non-cash impairment losses of $9.3 million or $0.37 per share. The company said that the cannabis segment increased 316% to $29.1 million from $7.0 million in 2018 and the propagation segment increased to $38.6 million
Zenabis said it was able to realize increases in revenue even with downward pressures on pricing in the adult-use recreational market as well as due to lower per gram revenue from wholesale bulk sales due to increasing demand for its products and the expansion of sales of value-added products such as pre-rolls.
Kevin Coft, Interim Chief Executive Officer of Zenabis, stated, “2019 was a transformative year for Zenabis with the substantial completion of the Company’s facility build-out. In addition, the Company achieved significant growth in revenue throughout the year and in particular, in the fourth quarter with 49% quarter-over-quarter revenue growth. I am pleased and thankful for the team’s efforts and focus on delivering on our construction and sales results. Zenabis is now a significant licensed producer with Zenabis Atholville being one of the largest indoor facilities in Canada. Although the Canadian recreational market had its challenges, we believe that the continued growth in the Canadian cannabis market remains positive.”
The fourth-quarter net revenue was $17.9 million versus $12.0 million in the third quarter. Zenabis said that the cannabis segment increased 50.1% to $10.6 million from $7.1 million in Q3 2019. Propagation segment increased 55.5% to $7.0 million from $4.5 million in the prior quarter
The fourth-quarter net loss was $98.7 million or $0.34 per share versus the net loss of $5.8 million or $0.03 per share in the third quarter.
Zenabis said it believes that persistent competition from the low-cost illicit market, as well as new supply from competitor LPs as their facilities reach full production, is likely to result in declines in the wholesale price of cannabis in 2020 and beyond.
The company has initially focused on two product categories for the recently legalized derivative products: vaporizers and beverages. Initial shipments of vaporizer products occurred in Q1 2020 and have continued to supply its cannabis concentrates in the form of vaporizing cartridges designed for use in PAX Labs Inc.’s Era vaporizing devices. Further, Zenabis remains on track to launch cannabis-infused beverages in Q2 2020 with its initial launch of cannabis-infused sparkling water beverages.
Zenabis cut its overhead by reducing the size of the Vancouver head office and its facilities which has resulted in a cost reduction of approximately $2 million per quarter. Additionally, construction activities at the Company’s various facilities has been largely completed as have ongoing material capital expenditures.