On March 4, the Canopy Growth Cannabis Company confirmed that it would shut down two facilities. Moreover, it will cut 500 jobs and also cancel any plans to open another greenhouse.
The Canopy stock lost 1% to $17.57 in aftermarket trading, but it has since recovered, gaining 2.36% hovering at $17.904.
Canopy (ticker: CGC) stated that it would close its greenhouses located in Aldergrove and Delta, British Columbia. Such sites are no longer essential to its cultivation footprint according to an official statement from the company.
The company is also no longer planning to open another greenhouse in Niagara-on-the-Lake, Ontario, as it had planned earlier.
David Klein, the company’s CEO, came in January from controlling shareholder Constellation Brands (STZ). He said in the press release that he would strive to enhance the alignment of Canopy’s resources with the consumer needs. He added:
“Today’s decision moves us in this direction, and although the decision to close these facilities was not taken lightly, we know this is a necessary step to ensure that we maintain our leadership position for the long-term.”
Many Canadian marijuana growers have encountered a lot of cash burns. Although Canopy’s investment from Constellation Brands indicates that it was better capitalized than its competitors like Aurora Cannabis (ACB), it also focused on the grower’s losses when they finally dragged on Constellation’s earnings.
Canopy anticipates pretax charges of between 700 million Canadian dollars (US$523 million) and C$800 million in its March quarter. These charges reflect this announcement and extra alterations related to its strategic and organizational review.
The British Columbia greenhouses account for around 3 million square feet of licensed production space. These facilities were put into commission starting in February 2018.
Through this financial turbulence, the company cited slower-than-expected development experienced in the Canadian recreational market. The slowdown led to many hiccups in eating up working capital and profitability in the pot trade.
Canopy also said that Canada did not allow any outdoor marijuana growing until after it made significant investments in greenhouses. Currently, the company has an outdoor site that it claims is more cost-effective.