- HEXO (HEXO) has announced cost-saving initiatives to carry the company into the future
- Initiatives include streamlining its organizational structure, reducing production costs and the sale of non-core assets
- It expects the plan to generate incremental cash flow of C$37.5 million in fiscal 2022 and $135 million in fiscal 2023
- HEXO is an award-winning licensed producer of innovative products for the global cannabis market
- HEXO (HEXO) closed down by 2.74 per cent trading at $0.71 per share
HEXO (HEXO) has announced cost-saving initiatives to carry the company into the future.
The measures seek to achieve positive cash flow from operations and solidify HEXO’s position as the number one cannabis company in Canada by recreational market share.
It expects the plan to generate incremental cash flow of $37.5 million in fiscal 2022 and $135 million in fiscal 2023.
Streamline and simplify the organizational structure
To more closely align its operating costs with its size, HEXO will reduce SG&A by 30 per cent by fiscal year-end 2023. It will achieve this through reduced reliance on outside consultants, streamlining the organization on a new IT platform, right-sizing the organization and realizing the synergistic benefits of recent acquisitions.
Reduce manufacturing and production costs
The company has identified $30 million in savings, including:
- Transitioning from co-packaging agreements towards in-house production capabilities
- Leveraging scale to deliver on procurement savings
- Reconfiguring its production network to achieve greater efficiencies, such as moving vape and distillate production to a Redecan facility
Sell non-core assets and reduce debt
HEXO sold its 25-per-cent interest in the Belleville Complex to Olegna Holdings for $10.1 million. HEXO will continue to lease the facility for processing, manufacturing and distribution with no changes to existing lease arrangements.
The company will use the proceeds to reduce debt, including amortizing its High Trail note.
“It is a strategic imperative for HEXO to strengthen its capital position and restructure the company’s operations to ensure a path to achieving positive cash flow from operations within the next three quarters,” stated Scott Cooper, President and CEO of HEXO.
“As an organization, we are making strategic decisions quickly to ensure we have the optimal operating footprint we need for the next phase in HEXO’s strategic evolution, while remaining focused on the needs of customers and in our continued efforts in product innovation,” he added.
HEXO is an award-winning licensed producer of innovative products for the global cannabis market.
HEXO (HEXO) closed down by 2.74 per cent trading at $0.71 per share.
