Hexo Closes Facilities
Hexo said yesterday they were ceasing operations at three production sites to centralize product cultivation, manufacturing, and distribution. By this decision, approximately 155 employees will be laid off or forced to move to the centralized location. Hexo stock was up 2.2% on the news yesterday. After an ugly quarter, Hexo reported an EBITDA (A) loss of $13 Million. The company is consolidating operations to reduce the cash burn to address the concerns with their senior secured convertible notes issued on May 27, 2021. Hexo has a cash balance of $485 Million and a short-term debt balance of $423 Million.
HEXO decided to decommission the following:
- Kirkland Lake, Ontario facility, which was acquired through the 48North acquisition, effective on January 31, 2022.
- Brantford, Ontario facility, which was acquired through the 48North acquisition, effective on January 31, 2022.
- The Stellarton, Nova Scotia facility was acquired through the Zenabis acquisition, effective February 28, 2022.
CRON's Blackeye
CRON is a Canada Long.
Just one day after a 26% spike, CRON is almost back to its Friday lows after dropping 15% on the day yesterday. The stock was lower as the company filed a 2B-25 saying it expects to report a Q3 goodwill charge for its Lord Jones unit. Unfortunately, the company has been unable to complete its financial statements for the period ending September 3th because the Audit Committee of its board requires additional time to evaluate goodwill and indefinite-lived intangible assets in the Lord Jones unit for impairment. As a result, the company expects to record a non-cash impairment charge of not less than $220M on goodwill and indefinite-lived intangible assets.
This should come as no surprise after Kurt Schmidt, Cronos Group Inc President & CEO, said on the last earnings call, "I have to say, we're -- overall, we're not happy with the results in the U.S. CBD market. We don't break down our performance by brand. But we are taking a strategic review of the brands. We've got some good things, but certainly, I'm not happy. I'd like to see faster growth."
A blackeye for sure, but it's not the story.
Arizona Tracker (September)
Arizona sales came in at $107 Million for the month of September seeing sizable declines in the medical marijuana market. Overall sales were down 3% sequentially. Adult-use sales were flat sequentially while medical decreased 5%. Arizona's market has been declining MoM since March of 2021 with the exception of July when almost all markets grew sizably. The annual run rate based off the past 3 months of sales is $1.36 Billion.
