Canopy Growth (TSX:WEED)(NYSE:CGC) once again expressed reservations about its financial sustainability as the Canadian cannabis producer continued to grapple with losses during the first quarter. Despite a promising beginning following the legalization of cannabis in Canada back in 2018, the domestic cannabis sector has been challenged by fierce competition from illicitly sourced, lower-priced marijuana. Canopy initially voiced concerns about its financial outlook in June.
The company has undertaken multiple strategies to achieve profitability, including workforce reductions, withdrawing from certain international markets, shutting down stores, and divesting its retail operations throughout Canada. Headquartered in Smiths Falls, Ontario, Canopy (TSX:WEED)(NYSE:CGC) held C$533.3 million in cash and equivalents by June 30, compared to C$677 million at the close of March. Its total debt stood at C$1.05 billion at the close of the reported quarter.
The cannabis enterprise observed a 3% growth in net revenue for the quarter, totaling C$108.7 million, driven by the expansion of its BioSteel segment, which specializes in sports nutrition products. However, the company anticipates lower sales in the upcoming second quarter due to seasonal factors, as revealed by Chief Financial Officer Judy Hong during a post-earnings conference call.
Furthermore, Canopy (TSX:WEED)(NYSE:CGC) is currently under investigation by the U.S. Securities and Exchange Commission regarding the revenue reporting of its BioSteel division. In June, Canopy initiated an internal review of BioSteel and made changes to its leadership team within the segment following the completion of the assessment. During the three months ending June 30, the company’s adjusted core loss narrowed to C$57.8 million, in contrast to the C$79 million loss recorded a year earlier, attributed to cost-cutting measures.
Throughout the quarter, the company successfully reduced costs by C$47 million, although it encountered elevated warehousing and production expenditures linked to the BioSteel manufacturing facility situated in Verona, Virginia.
Featured Image: Unsplash @ David Gabrić
