Tilray has a lower loss than expected as revenues increase

Tilray Inc. shares on Monday recovered some of their recent losses after the Canadian cannabis producer suffered a smaller-than-expected loss and played up the prospects for expansion into Europe and in beverages.

Tilray CEO Irwin Simon told MarketWatch that the company would consider acquiring companies that would increase earnings, but not companies that burn money. M&A agreements can help Tilray reach its 20% to 30% market share target in Canada.

“There has to be consolidation in the Canadian market because there are too many LPs (licensed manufacturers),” he said. “The question is whether an acquisition will be synergistic.”[ads1];

Simon said he would rather issue equity to buy a good company than issue new debt. “I’m not a big fan of debt … in part because I’m conservative and interest rates can go up,” he said. “The debt must be repaid.”

As for the company’s results for the second quarter, Tilray TLRY,

said it lost $ 201,000 or zero cents per share, compared to a loss of $ 99.9 million, or 41 cents per share, in the period last year.

Revenue increased to $ 155.15 million from $ 129.46 million.

Analysts expected Tilray to lose 9 cents a share on a turnover of 170.5 million dollars, according to a survey by FactSet.

Shares rose 3.6% to $ 7.28 on Monday, despite losses in the broad stock market. Before the gains, the stock had lost around 9% so far in 2022 and is down 43% in the last 12 months.

The cannabis company changes its name to Tilray Brands Inc. as it diversifies into beverages and other consumer-packaged goods.

At a conference call with analysts, Tilray said they would expect to take advantage of potential legalization of adult cannabis use in Germany. It also sees growth from its beverage brands, which include Sweetwater Brewing.

But the company said it still faces challenges with oversupply in the Canadian market, as well as the impact of the omicron coronavirus variant.

In another plus, Tilray said cost savings from the acquisition of Aphria will be $ 20 million more than expected, or a total of $ 100 million. The company has achieved $ 70 million in cost savings to date, and is on track to achieve its original cost reduction plan of $ 80 million ahead of schedule. It will generate an additional $ 20 million in synergies in the 2023 fiscal year.

Simon said the company maintained that it is the No. 1 market share position in Canada despite “market saturation” and related competitive challenges, according to a prepared statement.

“In Germany – Europe’s largest and most profitable market for medical cannabis – our nearly 20% share of the market leads,” he said. “We believe that this, combined with our infrastructure, will also allow us to capture the market for adult use as legalization accelerates under the new coalition government.”

In the United States, Tilray’s alcoholic beverages SweetWater Brewing and Manitoba Harvest generate revenue and continue to invest in products and acquisitions, he said.

“These profitable businesses also provide an opportunity to launch THC-based products through federal legalization in the United States,” said Simon.

At the company’s quarterly conference call, Simon said he does not expect US legalization this year or even next year, but in the meantime, the company is growing its footprint in the country.

During the quarter, the company expanded its spirits portfolio through the acquisition of Breckenridge Distillery. If cannabis becomes federally legal in the United States, Tilray will weave THC with alcohol into these products.

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