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'Some of these guys are going to disappear': Fall hits cannabis industry

Jeremiah Rodriguez, staff for CTVNews.ca, with report by Jonon Ehrlichman of BNN Bloomberg

Posted on Friday, November 15th, 2019 at 10:00 am EST

On the day that the Canadian stock market hit a high, cannabis stocks continue their downward spiral.

Edmonton-based Aurora Cannabis is the latest manufacturer to report disappointing financial results. Sales of weed for recreation decreased by 33% compared to the previous quarter.

By mounting pressure on investors, companies like Aurora are cutting costs where they can.

To save $ 190m in planned costs, the company announced that it is stopping construction of a manufacturing facility in Medicine Hat, Alta. and stopping work in another facility.

In Montreal, Aurora Cannabis President Michael Singer told CTV News, "we are tightening our belts and being very cautious about spending."

For the cannabis industry, it is a dramatic shift from the abundance of investment excitement observed over the past year to legalization.

Problems are being felt in communities such as the Niagara region of Ontario, where layoffs by the cannabis company Jackson have been reflected in the city of Lincoln. The company posted 200 jobs last month, which is nearly a quarter of its total workforce.

Sales in Canada's five largest tanks have eroded $ 33 billion of market value since May.

One of the biggest driving factors is the government's failed fight with the black market, cash-strapped companies and the slow activity of legal container stores in markets like Ontario.


Industry analyst Andrew Kissner at venture capital firm William O & # 39; Nile told CTV News, "We don't think they will be able to raise money easily. And in the end, some of these guys will disappear. "

Elsewhere in Ontario, shares of Mississippi-based Green Organic Dutch producer plunged sharply after the third-quarter loss of $ 20.1 million.

There are also some problems with the regulatory problems that some manufacturers face. Former high-flyer CannTrust was targeted by Health Canada for growing cannabis before obtaining a license.

Other types of problems are rising for fellow producers.

During a call with analysts, Mark Zekulin, chief executive of Canopy Growth Corp., said it was "unlikely" that Canopy would achieve its $ 250 million revenue target in its fiscal fourth quarter, which ends in March.

Zekulin also told BNN Bloomberg that his company had read the market for new products such as cannabis oils and gel capsules.

"The reality is that this could be 20 percent of the market for recreation," he said. It ended up somewhere within the five percent line, "he explained.

But the industry's positive spin in this ongoing downturn is the upcoming "Cannabis 2.0" – the highest success for things like cannabis fertilizers, oils and other foods – which companies hope to provide greater growth.

New regulations for cannabis glues and themes came into force last month, but due to the approval process the products will not hit the legal market until mid-December – at the earliest.

With files from the Canadian press

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