Aphria Doubles Revenue While Cannabis Production Costs Plummet

Workers trim marijuana vegetation in 2016 on the Aphria greenhouses in Leamington. The firm is present process a major growth.
Dan Janisse / Windsor Star

Workers trim marijuana plants in 2016 at the Aphria greenhouses in Leamington. The company is undergoing a significant expansion.

Dramatic cuts in production costs helped Leamington-based cannabis grower Aphria Inc. practically double its revenue within the last quarter of its 2017 fiscal 12 months.

The agency reported earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) of greater than $2.eight million. That’s a rise of 181 per cent over its third quarter earnings and marks the seventh consecutive quarter of constructive progress.

“Leamington used to be known as the Tomato Capital of Canada. We’re going to turn it into the Cannabis Capital of Canada,” stated Aphria CEO Vic Neufeld. “We knocked it out of the park the final quarter, exceeding (Bay Street’s) expectations.

“The most important thing we did is drive down our production costs. Nobody in the industry can touch our costs.”

The firm’s EBITDA for 2017 elevated to $6.1-million, a 962 per cent improve over 2016’s complete ($572,888).

Aphria, which makes use of greenhouses and pure mild as a substitute of indoor synthetic mild to supply its crop, benefitted from extra daylight hours and improved rising strategies to slash its “all-in cost” of production per gram from $2.23 to $1.67.

Neufeld stated the typical for all-in production value per gram for the remainder of the business is $three to $four.

With the legalization of cannabis on July 1, 2018, Neufeld stated the business should preserve paring production costs.

“The objective of the government is to get marijuana sales off the street corner and away from organized crime,” Neufeld stated. “But if you can buy a gram for $8 to $10 on the corner and it’s $12 at the LCBO, the consumer is going to go for the cheaper price point from Joe on the corner. There’s going to be price compression when recreational use is legalized.”

Aphria is promoting its medical marijuana merchandise for a median value of $7.75 per gram.

He stated it’ll be onerous to foretell the impression of legalization till the federal and provincial governments present extra readability for producers.

“We’re not waiting around; we already have a research and development centre working on things in anticipation of that market,” Neufeld stated. “There’ll be quite a lot of infused oils and merchandise associated to meals use.

“We’re flexible and we’re prepared to take whatever road is presented to us.”

With the main target of 2017 primarily on lowering production costs, enhancing high quality and getting the corporate’s growth plans in place, Neufeld stated the corporate is nicely positioned for speedy progress.

“I’d be disappointed if we didn’t double all of our metrics across the board in the coming year,” Neufeld stated.

“The real opportunity for growth comes when we finish Phases III and IV of our expansion.”

The firm added 53,000 sq. toes of area this spring with the second section of growth. The first crop of cannabis from the Phase II growth started being harvested final week.

Currently Aphria has 100,000 sq. toes of greenhouse area at its Leamington website. However, after Phase IV is accomplished by late subsequent summer time or early fall, the corporate can have a million sq. toes of greenhouse area.

A 350,000 sq. foot processing and storage centre and a $20-million co-generation energy plant can even be constructed as a part of the growth. The energy plant is anticipated to save lots of the corporate 9 or 10 cents a kilowatt-hour.

The firm at the moment employs 150 folks, however that can swell to 400 staff as soon as the growth is absolutely operational.

“No one has plans like this on the table,” Neufeld stated. “Once Phase IV is accomplished, we’ll be capable to produce over 100,000 kg yearly.

“Our production costs will go down even further with that volume. We’ll be able to lower our price $1 or $2 a bottle to handle the price compression when it comes.”

Neufeld stated Aphria has additionally invested $25-million in Florida-based Liberty Health Science, which launches initially of August. The firm can be eying growth into the German and Australian markets.

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Marijuana production on the Aphria greenhouses in Leamington will improve within the close to future.

DAN JANISSE /

Windsor Star

Source: The Herb News