- Cannabis distributor, HEXO Corp (TSX:HEXO) generated a net loss of C$364.3 million over the last six months
- This is a significant drop considering the company reported a net loss of only $17.1 million for the same period in 2018
- The loss is largely attributable to an impairment charge on the company’s Niagara facility and slower than expected retail sales
- In its current state, the company believes it will need to raise additional capital to meet all its financial obligations over the next 12 months
- HEXO Corp (HEXO) is down 13.7 per cent, with shares trading for $1.32 and a market cap of $375 million.
Cannabis distributor, HEXO Corp (TSX:HEXO) has generated a net loss of C$364.3 million in the last six months.
This is a significant loss, when compared to the $17.1 million loss the company reported for the same period in 2018.
Much the steep loss is attributable to a single impairment charge. After assessing the Niagara facility’s assets and longevity, HEXO placed the property up for sale. This resulted in substantial impairment loss of $138 million.
Ignoring non-cash losses and impairment charges, HEXO generated a net loss of around $57 million in the 2020’s first two quarters.
These operational losses are perhaps more concerning and show the general downturn in the cannabis industry over the last few months. HEXO believes that delays in cannabis related government approvals and a decline in retail sales have slowed distribution considerably.
Despite the poor performance, Sebastien St-Louis, CEO and co- founder of HEXO Corp, believes the company is well prepared for the difficult industry environment.
“We have continued our focus on improving our operations and expanding distribution across Canada.
“The industry continues to see challenges ahead, and following a strategic review of the Company’s core and non-core assets we believe we have positioned HEXO to meet these challenges head on,” he said.
Looking forward, HEXO has only $81.4 million cash and cash equivalents at hand for the coming months. As a result, the company believes it will need to raise additional capital to meet all its financial obligations in the next 12 months.
Concerning the ongoing COVID-19 pandemic, Sebastien went on the state that safety was the company’s first priority. Furthermore, despite widespread lockdown laws, the company’s manufacturing facilities remain open.
Cannabis cultivation is considered an essential medical service and therefore is unlikely to be affected by any further government mandated lockdowns.
HEXO Corp (HEXO) is down 13.7 per cent, with shares trading for $1.32 at 10:04am EST.