SNDL (NASDAQ: SNDL) is cutting its Canadian cannabis operations in a bid to enhance the profitability of the segment. The company last night revealed it would be closing what was once its flagship facility in Olds, Alberta, as part of those changes.
Cultivation activities are slated to be consolidated to SNDL’s Atholville, New Brunswick facility, while manufacturing, processing, and production operations will be centralized to Kelowna, British Columbia.
The changes are expected to improve margins due to “more sustainable fixed operating costs,” while also resulting in material cost reductions. Annual savings are estimated to be in excess of $10 million, which are in addition to $18.2 million in annualized savings since the company acquired The Valens Company earlier this year. Savings will be borne as a result of lower fixed overhead, power costs, and labor efficiencies.
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“In the past year, we’ve transformed our facility footprint with a clear goal of achieving profitability in our Cannabis Operations by 2024. As a result, we have taken the difficult but necessary steps to simplify operations throughout our business, which includes the closure of our Olds, Alberta facility,” commented Tyler Robson, President, Cannabis for SNDL.
SNDL’s operations in Atholville meanwhile are expected to expand in line with the decision, resulting in “potential employment opportunities,” however the company failed to disclose how many employees would be losing their jobs as a result of the Olds, Alberta closure.
SNDL last traded at $1.47 on the Nasdaq.
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