The Company announces the closure of two Canadian greenhouses, representing a significant step forward in aligning the Company’s cultivation capacity with projected demand.
Company expects to record estimated pre-tax charges of approximately $700-800MM in Q4 Fiscal 2020, as the Company completes its organizational & strategic review.
Canopy Growth Corporation (“Canopy Growth” or the “Company”) (TSX:WEED, NYSE:CGC) announced today that the Company plans to close its facilities in Aldergrove and Delta, British Columbia, resulting in the elimination of approximately 500 positions. In addition, the Company no longer plans to bring a third greenhouse online in Niagara-on-the-Lake, Ontario. These actions are part of the Company’s effort to align supply and demand while improving production efficiencies over time.
The greenhouses in B.C. account for approximately 3 million square feet of licensed production space and were put into commission, beginning in February 2018, after a period of phased retrofitting to help Canopy Growth scale up to supply the new Canadian adult-use market. Nearly 17 months after the creation of the legal adult-use market, the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry. Additionally, federal regulations permitting outdoor cultivation were introduced after the Company made significant investments in greenhouse production. The Company now operates an outdoor production site to allow for more cost-effective cultivation which will play an important role in meeting demand on certain products that rely on cannabis extracts. Following an organizational strategic review of production capacity and forecasted demand, the Company announced today that these facilities in Aldergrove and Delta, British Columbia are no longer essential to its cultivation footprint.
“When I joined Canopy Growth earlier this year, I committed to focusing the business and aligning its resources to meet the needs of our consumers,” shared Canopy Growth CEO, David Klein. “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. Along with the rest of the management team, I want to sincerely thank the members of the team affected by this decision for their work and commitment to building Canopy Growth.”
Along with this announcement, the Company expects, based upon information currently available to management, to record estimated pre-tax charges of approximately $700-800MM in the quarter ending March 31, 2020 reflecting today’s announcement as well as additional changes related to its organizational and strategic review.
All figures reported above with respect to the quarter ending March 31, 2020 are preliminary and are unaudited and subject to change and adjustment as the Company prepares its consolidated financial statements for the year ending March 31, 2020. Accordingly, investors are cautioned not to place undue reliance on the foregoing information. The Company does not intend to provide preliminary results in the future. The preliminary results provided in this news release constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities legislation, are based on several assumptions and are subject to a number of risks and uncertainties. Actual results may differ materially. See “Notice Regarding Forward Looking Statements”.