Aurora Cannabis Cuts Losses As It Continues To Hunt For Savings

Aurora Cannabis (TSX: ACB) has trimmed its net loss by $590.4 million in the latest quarter, while simultaneously advancing its efforts to cultivate an orchid business for the future.

In its most recent financial disclosure on Thursday, the cannabis company unveiled a first-quarter net loss of $28.3 million, a strong improvement compared to the $618.8 million net loss recorded a year earlier.

This substantial reduction over the three-month period ending June 30 can be attributed to a boost in gross profit, coupled with diminished impairment charges and operational expenses. These achievements are a direct result of an ongoing transformation initiative, which has already unveiled $400 million in savings and is targeting an additional $40 million in savings in the near term.

Aurora’s Chief Executive, Miguel Martin, expressed his confidence in the company’s trajectory, stating, “Our target of removing a further $40 million of cost during fiscal 2024 is ambitious, but when considering how much we’ve already accomplished through our business transformation, it is entirely within our wheelhouse.”

This cost-cutting journey, led by Martin over nearly three years, has entailed workforce reductions and facility closures, including the shutdown of Aurora’s Nordic production facility in Denmark. Concurrently, it has spotlighted Aurora’s ventures beyond cannabis, such as Bevo Agtech Inc., which specializes in supplying vegetable seedlings and flowers.

Aurora had acquired a 50.1% stake in Bevo last year for $45 million, with a potential additional $12 million contingent upon Bevo achieving specific financial milestones at its Langley, B.C. facility.

Bevo contributed a noteworthy $19.9 million in net revenue to Aurora during the first quarter, surpassing the $13.2 million attributed to consumer cannabis, yet falling short of the $41.6 million generated by the medical cannabis division. Overall, the company’s net revenue for the quarter totaled $75.1 million, an increase from the previous quarter’s $64.0 million and previous year’s $50.1 million.

Aurora is anticipating a promising future for Bevo, particularly within the next two to three years, as it enters the orchid industry, which Martin believes is poised for a transformative shift in supply chains.

“Prefinished orchids in North America are mainly sourced from overseas with the cost and quality issues that brings, but the capital required to build the highly controlled environment to grow orchids in North America is a barrier,” he explained.

Fortunately, Aurora possesses “underutilized” facilities, such as Aurora Sky in Leduc, Alta., perfectly positioned for orchid cultivation.

Bevo’s existing clientele, composed of well-established retailers, is expected to further benefit from this orchid endeavor, according to Martin.

The company foresees its initial orchid harvest from Aurora Sky later this year, with additional sales anticipated from its Aurora Sun facility in Medicine Hat during the first half of the upcoming fiscal year.

Beyond the orchid initiative, Martin’s enthusiasm extended to the company’s first-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.2 million, in stark contrast to the $8.8 million loss recorded a year prior.

Notably, this $2.2 million represents a first-quarter milestone for the company and marks the third consecutive quarter of positive adjusted EBITDA. These accomplishments lend the company confidence in its aim to achieve cash flow positivity by the next fiscal year.

Aurora Cannabis last traded at $0.53 on the Nasdaq.

Information for this briefing was found via Sedar, Financial Post, and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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