Aphria (APHA.TO)(APHA) shares fell more than 15 per cent on Thursday after the company reported sales that missed analyst forecasts. The Canadian cannabis producer said the COVID-19 pandemic led to a decline in its medical pot business in Germany, offsetting “significant increases” in net cannabis revenue.
The Leamington, Ont.-based company said it booked $145.7 million in net sales in the first quarter of 2021, four per cent lower than the fourth quarter of 2020. Aphria blamed fewer in-person visits to physicians and reduced elective medical procedures in the lucrative German medical market.
The company booked a narrower-than-expected net loss of $5.1 million or $0.02 per share, and adjusted earnings before interest, taxes, depreciation and amortization of $10.0 million.
Analysts polled by Bloomberg expected revenue of $159.6 million and a net loss of $9.5 million, as well as $11.9 million in positive EBITDA. The three months ended Aug. 31 marks the sixth consecutive quarter of positive adjusted EBITDA for Aphria.
Net cannabis revenue increased to $62.5 million in the first quarter from $53.1 in the prior period.
"Our strong first quarter results reflect the continued robust growth and development of Aphria's adult-use cannabis brands in Canada," chief executive officer Irwin Simon stated in a news release on Thursday.
"Our financial results continue to be the envy of the industry," chief finance officer Carl Merton told analysts on a post-earnings conference call Thursday morning, touting record gross revenue for recreational-use cannabis in the quarter, and cash cost per gram below $1.
Toronto-listed shares fell 15.43 per cent to $6.52 at 11:18 a.m. ET.
On Wednesday, Canaccord Genuity analyst Matt Bottomley predicted strong Canadian recreational sales growth in the quarter, driven in large part by more retail cannabis stores in Ontario, where Aphria has held a leading market share position.
Aphria’s stock has outperformed rivals such as Canopy Growth (WEED.TO)(CGC), Aurora (ACB.TO) (ACB) and Tilray (TLRY) over the past three months, rising more than 20 per cent compared to gains of just 1.8 per cent, and declines of 62.9 per cent and 21 per cent, respectively.
Aphria said it continues to build market share in Canada as its brands gain traction in Ontario, Alberta, Quebec and British Columbia. However, like many licenced producers in Canada, Aphria noted its newly-launched large format discount brand increased overall sales while hurting gross margins.
COVID-19 hits medical cannabis sales
According to the company, COVID-19 has had minimal impact on its supply chain. However, the pandemic has hit Aphria’s medical cannabis distribution business, most notably CC Pharma in Germany, as fewer patients visit doctors, hospitals, pharmacies and clinics.
The company warned that its Canadian medical business could also be hurt by declining new patient registrations and fewer clinical visits as a result of the pandemic.
“Visits were noticeably down during the quarter. Post-quarter, we are beginning to see improvements,” Merton said on the call. “Given the continuing global health crisis, these activities will continue to impact both distribution revenue and medical cannabis revenue going forward.”
‘Don’t count us out’ of the U.S. market
Chief executive officer Irwin Simon addressed Aphria’s potential expansion into the U.S. market, a jurisdiction where many of the company’s competitors have charted a clearer path.
Aphria ended the quarter with $400 million in cash and cash equivalents to fund planned Canadian and international growth. The company said it plans to be free-cash-flow positive in its fiscal third quarter.
“There is M&A stuff that we are looking at,” Simon said. “Don’t count us out just because we don’t have a big strategic partner. We know the U.S. well. We know the opportunities. And with Aphria performing the way it is, I will tell you there are multiple companies [and] partner opportunities for us. We want to pick the right one. It’s not just about money.”
Simon compared competitors’ stakes in U.S. multi-state operators to buying a lottery ticket, citing the uncertain outlook for federally legal recreational cannabis in that country.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.