Cannabis manufacturer Hexo shuts down plant in the midst of deep reductions

Cannabis manufacturer Hexo Corp. will shut down several facilities it operates near Niagara Falls, Ontario, as a result of 200 layoffs it announced Thursday, according to people familiar with the matter.


HEXO, -6.32%

HEXO, -5.70%

did not respond to phone and email requests for comment. It was not immediately clear what effect the closure of the Ontario plants will have on the company's operations. The Ontario facilities were once run by Newstrike Brands, which Hexo purchased in the spring. Hexo had 822 employees as of April 30, according to the latest quarterly filing, and added around 250 more when the acquisition of Newstrike closed in May.

The closure and layoffs for Hexo arrive in the midst of a broad downturn in the sector, as cannabis companies in Canada struggle to meet investor expectations and in some cases their own ̵[ads1]1; as in Hexo's case. The lack of weed retail stores is still an ongoing issue in Canada as the first anniversary of a legal, recreational spot rolled out on October 17. Wall Street analysts have also lowered expectations in recent weeks and issued a wave of price target reductions.

The Hexo share dropped 6.3% in ordinary trading and fell 2% during the after-sales session.

US traded shares in Hexo have fallen 41% over the past three months, as the benchmark S&P 500 index

SPX, + 0.19%

has dropped 0.5%. ETFMG Alternative Harvest ETF

MJ, + 1.14%

has fallen 29% over the last three months and Horizons Marijuana Life Sciences Index ETF

HMLSF, + 0.66%

fell 33.5% over the same period.

The closure was also reported by The Hamilton Spectator, who said the layoffs occurred at a site with two greenhouses in production in Beamsville, Ontario and two more greenhouses under construction. The newspaper said that 100 layoffs happened on the site.

Hexo's layoffs announced Thursday include Chief Production Officer Arno Groll and Chief Marketing Officer Nick Davies.

The plant was shut down the day after the Quebec-based licensed cannabis manufacturer said it collected $ 70 million ($ 53.5 million) in convertible bonds through a private placement and postponed its earnings to Tuesday.

Hexo is now expected to report its July quarter results Monday, with a conference call scheduled for Tuesday at 8:30 p.m.

According to analysts polled by FactSet, Hexo is expected to report $ 0.06 losses.

Hexo is expected to report sales of $ 15 million, up from $ 1.4 million in the previous year. Earlier in October, Hexo sent a revenue warning, telling investors that it now expects revenue for the July quarter of $ 14.5 million to $ 16.5 million, well below the then $ 24.8 million consensus. Hexo also withdrew its economic budget outlook in 2020 and offered no compensation.

Hexo CFO resigned in early October.

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