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Canopy Growth shares fall as fourth-quarter revenues rise, loss deepens

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Canopy Growth Corp’s better-than-expected fourth-quarter revenues weren’t enough to quell investor concern as the cannabis company’s expenses ballooned, its net loss widened and medical and recreational sales activity slowed from the previous quarter.

Shares of Canopy fell 7.6 per cent on Friday to close at $53.28 after Canada’s biggest cannabis company by market value reported its earnings for the three-month period ended March 31.

Canopy’s co-chief executive Bruce Linton said it focused on investing heavily for longer-term growth, such as ramping up production capacity and readying for the launch of edibles and other next-generation cannabis products when legal later this year.

“We’ve prepared ourselves the best for everything ahead, and we’re in the best position we’ve ever been to execute against what is an ever-bigger opportunity,” he said in an interview.

Canopy reported net revenues of $94.1 million for its financial fourth quarter, up from $22.8 million and above analyst estimates. However, the Smiths Falls, Ont.-based firm posted a net loss attributable to shareholders of $335.6 million, or 98 cents per share, up sharply from a loss of $61.5 million or 31 cents a year earlier.

That is three times the net loss of 30 cents per share expected by analysts, according to Thomson Reuters Eikon.

On an adjusted basis, Canopy’s loss before interest, taxes, depreciation and amortization (EBITDA) amounted to $98 million, compared with its $21.7-million loss a year ago.

Quarterly operating expenses totalled $242.9 million, up from $56.2 million during its financial fourth quarter in 2018.

Vivien Azer, an analyst with Cowen, said its quarterly revenues “encouragingly” came in ahead of estimates and Canopy remains the leader in total cannabis sales among the major Canadian licensed producers.

However, this was offset by a record-low gross margin of 16 per cent, and a wider loss, she said in a note to clients.

“While we appreciate the nascent stage of the industry, WEED (Canopy) will clearly need to start showing expense discipline and operating leverage to maintain investor confidence,” Azer wrote.

On an annual basis, Canopy reported net revenues for its 2019 financial year of $226.4 million, up from $77.9 million a year earlier, boosted by the legalization of recreational pot in October.

Its annual net loss attributable to shareholders totalled $685.4 million, up from $70.4 million during the previous financial year.

Linton said Friday that the cannabis company has reached the “bottom of our margin trough.”

“By the time we exit this year, we’re moving up the margin model back to where we were, and we’d like to do that well or better,” he told analysts, pointing to its investments and the potential from the sale of higher-margin edibles and other ingestible products as early as December.

Canopy’s recreational cannabis gross revenue in its fourth-quarter amounted to $68.9 million, down from $71.6 million in the previous quarter ended December 31.

On the medical side, the company’s revenues in Canada during the fourth quarter totalled $11.6 million, down from $19.5 million a year earlier and $15.9 million in the previous quarter.

International medical revenues took a hit as well, falling to just $1.8 million in the latest quarter, down from $2.4 million a year ago and $2.7 million in its third quarter.

The deceleration in sales in the various segments was expected, given the “anemic overall category revenue trends” in January and February across the sector, said Azer.

Cannabis retailers have been grappling with supply shortages since legalization, prompting some provinces to hold off on issuing new retail licences and others to limit store operating hours, but the situation has improved in recent months.

Linton pointed to the shift of some of its medical brands, such as Leafs by Snoop, over to the recreational market as a factor in its medical sales decline. As well, Canopy focused on supplying the domestic market first, which had a ripple effect on its international sales, he added.

During the current quarter, however, Canopy expects to harvest about 34,000 kilograms, more than double than during its financial fourth quarter and nearly quadruple its harvest in the quarter prior to that, the company’s acting chief financial officer Mike Lee said during the conference call.

As the company pushes into the U.S. market for CBD — after the U.S. Farm Bill opened a legal channel to do so — and rolls out a suite of Cannabis 2.0 products starting in December, Canopy expects to be EBITDA-positive in roughly two years, or its 2021 financial year.

“We’re not giving hard guidance, but that looks like a reasonable and probable target,” Linton said.

Armina Ligaya, The Canadian Press

Note to readers: This is a corrected story. A previous version said Canopy had a gross margin of more than 50 per cent in the previous quarter.


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Agriculture

Why Canadians Should Care About Land Loss

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Why Canadians Should Care About Land Loss

Developments are increasingly taking over Canadian farmland. Farms once took up much of Canadian land. However, that case is not true today. Only about 5% of Canada’s land is considered prime farmland. This prime land borders one of Canada’s fastest-growing regions, and once suburban development overtakes it, Canadian farmers will have a challenging time providing food for the cities.

Farmers in Canada make their livelihood by planting, growing, harvesting and distributing food to the Canadian populations. Without land, both farmers and the rest of those living in Canada will not get fresh, Canadian grown produce.

Here are some reasons why Canadian farmers should care about land loss:

  1. Farmland Provides Food

While this is an apparent reason, it’s an essential one. Prime farmland in Canada produces food for major Canadian cities. As farmers continue to lose land, they have to rely on a smaller acreage to make the same amount of food — if not more — for the growing population.

Over the past 10 years, almost 1 million hectares of agricultural land has diminished due to development and growing populations. Agriculture continues to adapt to land loss. However, further technological advancements must first take place to grow enough produce vertically rather than horizontally.

  1. Land Preservation Will Help the Economy

Farmland preservations come with a wealth of economic benefits. Agriculture contributes to the economy through the following ways:

  • Sales: For the economy to survive, there needs to be consumer demands and sales. Almost everyone purchases produce, so there will always be a demand for those goods. Without land to grow agricultural products, no sales will be made, and the economy could suffer.
  • Job opportunities: Less than 2% of Canada’s population works in the agriculture industry. While it’s not much, that’s still over 750,000 people. Preserving farmland shows a commitment to the industry. Land loss would create job loss. However, maintaining the farmland — and even reclaiming it, along with pastures — could boost the sector and, therefore, the economy. It would provide unemployed people with job security.
  • Secondary markets: Farmers are just one part of the food business. Because of farmers and farmland, secondary markets can thrive. These would include processing businesses, restaurants, schools, grocery stores and even waste management companies.

Canadian farmers should care about land loss because standing back and allowing companies to overtake the farmland could seriously affect the economy.

  1. Farmland Benefits the Environment

Wildlife often depends upon farmland for both food and habitat. Various types of farmland create diverse habitats for many different species. Without land protection, these habitats and food sources would be destroyed, leaving many animals without a place to survive. Many would have difficulty finding a native habitat.

Additionally, growing crops helps eliminate some of the carbon dioxide released into the air. Air pollution could decrease for Canadian cities as long as no more farmland is used for development.

One major problem occurring with Canadian farmland is desertification. This happens when the soil loses nutrients and becomes barren. The urbanization of Canadian farmland is the primary contributor to desertification, which speeds up climate change and harms the environment. Keeping farmland as-is will slow down climate change.

  1. Land Loss Affects Farmers’ Jobs

Perhaps the main reason why Canadian farmers should care about land loss is because their livelihood could be taken away. If they don’t have the means to keep up with technological advancements in the agricultural industry, they will not be able to continue their jobs if they experience land loss.

Agriculture is an essential industry. Not everyone can pick up the skills needed to grow their own food, and so many people depend upon farmers for nutrition and goods.

Take a Stand to Preserve Farmland

Farmland is a worthwhile and precious resource for many people. Reduction in farmland acreage will hurt Canadian farmers and the rest of the population, the economy and the environment. Taking steps to prevent more land loss can slow the rates of destruction and keep natural habitats thriving for both humans and animalls.

Click here read more stories by Emily Folk. 

I’m Emily Folk, and I grew up in a small town in Pennsylvania. Growing up I had a love of animals, and after countless marathons of watching Animal Planet documentaries, I developed a passion for ecology and conservation.

Canadian Agriculture More Energy Intensive, More Efficient

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Agriculture

Canadian Agriculture More Energy Intensive, More Efficient

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Canadian Agriculture More Energy Intensive, More Efficient

It’s no secret that agriculture has contributed to climate change through various means. For example, you may know that livestock generates greenhouse gas emissions due to how farms process it. That said, it’s now clear that farmers have found sustainable ways to offset those contributions. In Canada, it’s all about energy use.

Here’s how Canadian farmers have become more efficient as they raise crops and livestock, setting a standard the world should follow.

Energy Demand and Consumption Have Fluctuated

The demand for energy has increased across the agricultural sector as a whole. However, it’s key to note that farmers have begun to use less energy despite that fact. That points to more efficient practices. The farmers who complete their work productively save time, money and energy. As a result, Canadian workers have reduced their energy consumption per dollar by 17%. That’s thanks to sustainability.

The most common energy sources include fuel, gas and electricity. It’s how farmers use those resources that counts. Combined with technology choices and new practices, it’s clear that efficiency is more achievable than ever.

What Contributes to This Phenomenon?

It’s crucial for people in agriculture to explore eco-friendly alternatives. The grasslands that many western Canadian farmers cultivate contains excess carbon, so you can imagine what the country as a whole holds underneath its surface. Farmers have now adopted new methods to adjust how they harvest their crops. These systems are better for production, as well as soil and seed health overall.

The agriculture industry has gone through many changes, too. There are fewer farms — but those that still operate have employed agricultural technology to be as efficient as possible. These tools include different equipment that cuts down on time to increase proficiency. Plus, it’s now more common to use solar power as an alternative to traditional energy solutions.

Why Accuracy and Precision Matters

It’s a lot easier to be energy efficient when you don’t waste your resources. The means farmers practiced before they used specific innovations often created a time deficit. If you have a smaller machine, you likely need to do twice as much work. However, when you have access to equipment that fits your field, you don’t have to be as wasteful. The accuracy and precision created by technology make this a reality.

Soil Conservation Is Led by Ranchers

Many farmers have looked to ranchers for help. It’s a native part of ranching to preserve topsoil and other elements that are inherently sustainable. As a result, it seems like ranchers have been leading the charge against climate change for decades. The tactics they use to avoid tilling soil, for example, help preserve the amount of carbon that lies underneath the Earth’s surface.

The “no-till” practice is efficient in its own right. Rather than till your soil to plant a new crop, you simply leave behind what’s already there. This method is much better for soil nutrition, and it can keep carbon exposure at bay. As a result, you have much fewer carbon emissions. In general, the idea of soil conservation isn’t a new one, but old tricks can still work alongside modern technology.

The Future of Agriculture in Canada Looks Bright

If farmers continue on this path, it’ll be clear that climate solutions are at the forefront of their minds. These efforts create more benefits for them as they save time and money. Plus, there’s always the responsibility of maintaining the planet’s health. After all, without a strong ecosystem, agriculture would suffer. Through means that are more accurate and conservative, Canadian farmers have been able to become more efficient. Click here read more stories by Emily Folk. 

I’m Emily Folk, and I grew up in a small town in Pennsylvania. Growing up I had a love of animals, and after countless marathons of watching Animal Planet documentaries, I developed a passion for ecology and conservation.

 

 

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