Aurora Cannabis (TSX: ACB) (NYSE: ACB) this morning released an update in relation to its ongoing business transformation plan. The latest developments include significant headcount reductions as well as the closing of five production facilities over the next two quarters as the company looks to cut costs and work towards profitability.
Headcount reductions were stated to be approximately a 25% cut for the firms selling, general and administrative staff, in addition to approximately 30% of all production staff. In terms of SG&A staff, reductions will have an immediate effect, while the production staff will be laid off over the next two quarters as facilities close. The company also revealed that the recent retirement of President Steve Dobler was essentially forced as a means of reducing costs.
With these additional headcount reductions, the company now expects the first quarter of 2021 to have a selling, general, and administrative expense run rate of approximately $42 million. Aurora anticipates this will be capable of supporting higher levels of revenue while not further increasing costs.
More shocking than headcount reductions however is that five production facilities are scheduled to be shut down over the next two quarters, including facilities acquired in the $1.1 billion acquisition of Saskatchewan-based Cannimed Therapeutics in 2018. Facilities include:
- Aurora Mountain
- Aurora Prairie
- Aurora Ridge
- Aurora Via
- Aurora Eau
Part of Aurora Eau is expected to remain operation to allow for higher margin products to be manufactured. Following the closures, production and manufacturing will be consolidated to Aurora River, Aurora Sky, Whistler Pemberton and Polaris.
In connection with the headcount reductions and facility shutdowns, the company expects to take an asset impairment charge of up to $60 million during the fourth quarter of 2020. Even more significantly however, is that a $140 million impairment in the carrying value of inventory is to be taken as well – 40% of which is simply related to the company valuing the product higher than it sells for. The impairment amounts to 55.7% of the inventory value that was on the books as of March 31, 2020.
Aurora Cannabis last traded at $14.28 on the NYSE.
Information for this briefing was found via Sedar and Aurora Cannabis. 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.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.