Village Farms announced its financial results for the second quarter ended June 30, 2018.
Highlights
- Sales of US$42.0 million, a decrease of (8%) from US$45.5 million;
- Net loss was US($2.3) million, or US($0.05) per share, compared with net income of US$4.3 million, or US$0.11 per share;
- EBITDA of US($1.3) million, compared with US$1.3 million,
- Closed a private placement of 1,886,793 common shares of the company at a price of CAD$5.30 per common share for total gross proceeds of approximately CAD$10,000,000, the net proceeds of which will be used to contribute capital to Pure Sunfarms Corp., the company's 50% owned joint venture for large-scale, low-cost, high quality cannabis production in Canada, as it continues conversion of, and ramps up commercial production at, its 1.1 million square foot Delta 3 greenhouse, as well as for general working capital purposes; and,
- Extended its exclusive produce distribution agreement with Leamington, Ontario-based Great Northern Hydroponics, for an additional three years.
- Highlights for Village Farms' Cannabis Joint Venture, Pure Sunfarms
- Since May of this year, Pure Sunfarms has received from Health Canada two successive amendments to the cultivation license for its Delta 3 greenhouse, enabling it to expand its cannabis production area to 225,000 square feet of the 1.1-million square foot facility. The entire 225,000 square feet is in production and Pure Sunfarms expects to have the entire 1.1 million square foot Delta 3 facility converted for cannabis production by the end of this year, with the majority of that in production, and to be in production on the entire 1.1 million square feet in the first quarter of 2019.
- On July 30, 2018, Pure Sunfarms received its cannabis sales license from Health Canada, permitting it to immediately begin selling product from its expanding inventory of high-quality dried cannabis, The sales license positions Pure Sunfarms to secure additional supply agreements with other licensed producers, as well as with provincial government distributors for the imminent legal adult-use marketplace. Pure Sunfarms has since completed its first sale of cannabis.
"Less than 12 months after submitting its application for a cultivation license, Pure Sunfarms is growing, harvesting, and, now, selling high-quality cannabis, as demand for product increases ahead of imminent adult-use legalization on October 17," said Michael DeGiglio, CEO, Village Farms. "Pure Sunfarms has completed multiple harvests and both quality and yield are exceeding expectations. The Delta 3 greenhouse, optimized for efficient, continual year-round production, is operating as designed. Everyday, the operation is benefitting from the deep experience of the growing team, the existing skilled labour force and the specific knowledge and advantage that comes with having operated this large-scale greenhouse for two decades. With each new flower room planted out, with each harvest, I am more confident in Pure Sunfarms' ability to become a premier, vertically integrated supplier to the Canadian cannabis market, with the advantage of being the low-cost producer."
Mr. DeGiglio added, "Pure Sunfarms is on firmly track to begin generating positive cash flow for Village Farms as early as the first quarter of 2019. We are proud to be able to drive what we believe will be meaningful, long-term value for our shareholders with minimal capital investment, minimal dilution and using only our existing internal management team and staff at Village Farms to support our investment."
Mr. DeGiglio added, "In our incumbent produce business, as expected we saw lower production volumes, as we have not yet fully replaced the capacity from the transfer of the Delta 3 facility to Pure Sunfarms due to the transition of new Mexican partner grower who is continuously expanding their acreage through 2020. Our 2018 U.S. production is lower than 2018 due to several factors, including planned maintenance at our Monahans facility, record temperatures in Texas, and weather-related damage to a portion of one of our facilities. Profitability this year continues to be impacted by significantly higher freight costs of $0.8m, as the entire U.S. economy struggles with limited trucking capacity in the wake of new regulations. Our produce business continues to focus on maximizing margins through exclusive, higher-margin varieties and low-cost production as we provide the highest quality and safest produce to the leading grocers across the U.S. and Canada. I am very pleased that we have extended our exclusive distribution agreement with Great Northern Hydroponics, an Ontario-based, world-class grower of premium produce, for another three years."