Canadian Cannabis Producer Cronos Group (CRON) on Thursday reported revenues from the first quarter that peaked expectations, but sales growth arose briefly as it struggled with bottlenecks in licensing, distribution and packaging.
The company also said it would have to spend more to roll out new derivative products such as vaping units and dining tables later this year.
The results hit markets such as Canada's marijuana industry is about revoking licenses and difficulties with packaging regulations in the wake of recreational relaxation in October. CEO Mike Gorenstein, during Cronos Group's first-quarter revenue conference, said that problems related to treatment and packaging were "resolved" but not completely resolved yet.
He said the company would be able to iron out seams in production the next couple of quarters, potentially supported by packaging engineers and automation experts from Marlboro maker Altria (MO), who has invested $ 1.8 billion in cannabis company.
Crono's stock marched higher after the investment deal, announced in December. However, the shares have shot lower since February, when the pot producer's share price became more untethered from its actual finances. Canopy Growth (CGC) and Aurora Cannabis (ACB) provides more sales than Cronos.
When Cronos Group reported fourth quarter results in March, sales also arose. The company at that time did not break out recreation sales, as others have.
Shrinking stocks, limited capacity and suspension related to packaging and handling of raised concerns among some analysts about the company's ability to get the product out and push sales higher.
Cronos Earnings, Cronos Stock
The company on Thursday reported a net profit of 48 cents Canadian (36 cents US) outlook a 3-cent loss in US currency. Cronos reported a $ 558,000 Canadian operating loss, but it was down from $ 2.2 million in the previous year.
Revenue increased 120% from the year to 6.5 million Canadian (4.883 million), but 15% quarter over the quarter. Analysts saw sales spread of 150% to $ 5 million.
Management said that the quarterly surplus in sales was largely driven by higher flower sales and an increase in CBD oil sales, which did not have a reduction in the tax rates. The company sold 1,111 kilos of weeds in the first quarter. There is a 122% jump from a year ago.
Cannabis oil represented 23% of sales from cannabis products in Q1, compared to 9% a year ago.
Operating expenses increased due to staffing increases and professional fees for some services related to some strategic measures.
The Cronos share went 8.6% to 14.13 in the stock market today, heading for its 200-day line for the first time. The share has a composite rating of 47 of a best possible 99, according to Marketsmith. But the EPS assessment, a measure of the company's profits, is far worse. The rating is at 5.
Other marijuana shares
Among other marijuana shares, Canopy Growth stocks lost 2.4% to 46.89 on Thursday. The stock eliminated short consolidation with a 51.91 entry, but has withdrawn enough to void that place of purchase. Canopy Growth stock tests support on its 50-day line.
Aurora Cannabis stock fell 2.2%. Aurora has struggled to find support on its 50-day line. Early Thursday, Aurora Cannabis said it expanded its exclusive offering with Luxembourg. The company reports revenue after closing on Tuesday, with the conference following the results the next morning.
Tilray (TLRY), which also reports Tuesday, was up 0.6%. CannTrust (CTST) withdrew 3.6%. CannTrust also reports on Tuesday.
Waiting for Licenses
Many of the cannabis industry lose money as it tries to stay on the right side of the regulations and open up more adult rooms to meet demand. Legal cannabis sales in Canada fell month-on-month in January and February, according to government data. Marijuana shares over that time have faced an uneven trip.
Cronos's management on Thursday said it was still waiting for licenses in its last remaining flower-business rooms – the industry's dry bud conditions – in Building 4, the company's 286,000-square-foot manufacturing facility. The management said it is expected that all of these rooms will be "populated" in the first half of this year.
Cronos has said it will work with contract farmers to produce cannabis, rather than being peasants themselves. The company sets itself apart by focusing on ways to extract and isolate various drugs from the cannabis plant, known as cannabinoids, and combine them in different ways to deliver accurate experiences and dosage levels targeting different types of recreational and medical marijuana clients. Examples of cannabinoids are known compounds such as THC and CBD. But there are others like THCV, said to work as an appetite suppressant, and CBN, as some say can be used as a sleep aid.
Cronos has collaborated with Gingko Bioworks to produce cannabinoids more effectively. However, some analysts discuss whether the partnership is enough to put the company apart from rivals.
With cannabis products such as vapes, beverages, and edibles set to be legal by mid-October, Cronos said it would initially focus on building weapon devices, which have become more popular. Cronos said it would use the Altria investment fund against the second phase of pot legalization in Canada.
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