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UPDATE: This story has been updated to reflect Aurora Cannabis' new statement that it is cutting eight per cent of its workforce, not 12 per cent as it originally stated in emails to Yahoo Finance Canada.
Aurora Cannabis (ACB.TO)(ACB) says approximately eight per cent of its global workforce was laid off in the closure of a facility once touted as a “centre of excellence” for the company’s higher-margin cannabis 2.0 products. The move adds to mounting concerns about the Edmonton-based pot producer, coming on the heels of a decision to push back the release of its fourth-quarter and full-year 2021 financial results without explanation.
Toronto-listed Aurora shares were slightly weaker in early trading Wednesday, down 1.94 per cent to $7.57 at 9:35 a.m. ET. However, the stock has fallen more than 67 per cent from its recent high in February, outpacing a broader decline in cannabis stocks. Analysts have taken issue with Aurora’s cash position, dwindling recreational market share in Canada, and slow-moving progress in the U.S. CBD market.
An Aurora spokesperson did not disclose the exact number of employees impacted by the closure of the Aurora Polaris facility in Edmonton, which was announced by the company on Tuesday afternoon. The spokesperson initially said the move affects approximately 12 per cent of the company’s global workforce, and later advised Yahoo Finance Canada the figure is roughly eight per cent.
"As we work through the changes, we’ve identified opportunities to move talent within our organization and the impact will be approximately 8% of our global workforce."
She added that distribution of medical cannabis will be shifted from Aurora Polaris to nearby Aurora Sky. Manufacturing capacity will be moved to Aurora River in Bradford, Ont.
"We aspire to be a leaner, more agile organization that keeps pace with our competition and is on a path to profitability," a spokesperson told Yahoo Finance Canada in an emailed statement. “After painstaking review and thorough consideration, we are taking the necessary steps to strengthen our core operations to meet current and future demand.”
The company laid off more than 1,000 workers last year, and has continued to cut staff and production in 2021.
Downsizing has become the norm in Canada’s cannabis industry, as licensed producers dismantle the production facilities that led to an industry-wide supply glut. Last week, Tilray (TLRY.TO)(TLRY) said it would shut down its flagship facility in Nanaimo, B.C. as part of cost-cutting plans following its merger with Aphria.
Twitter was buzzing with rumours about Aurora on Tuesday, prior to the company announcing the closure of its Polaris facility, and an unknown number of staff reductions. Investors braced for news after Aurora issued a press release on Monday delaying quarterly results that had been scheduled for release after the closing bell on Tuesday. Aurora says it will report its fourth quarter and full 2021 fiscal year after the markets close next Monday.
Analysts anticipate the results will reflect a tough three months at the Edmonton-based pot company once seen as a pillar of Canada’s legal pot industry. Those polled by Bloomberg expect Aurora will report $56.4 million in sales, and an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $16.6 million.
“On Aurora's current operations, there is not much to get excited about. Particularly worrying is its top line trends, largely in Canadian adult-use, but U.S. CBD has also done little to build any sort of conviction,” Jefferies analysts Owen Benntt wrote in a Sept. 3 note to clients.
“If we look at its Canadian market share trends, recent performance has been very poor. Further, the company is still losing money — its cash from operations seeing another outflow of $66 million in the most recent quarter.”
Bennett does not see Aurora turning a profit, as measured by positive adjusted-EBITDA, until 2023. Cantor Fitzgerald analyst Pablo Zuanic wrote in a Sept. 16 research note that his three-year projections do not assume profitability by that measure.
Zuanic wrote about the potential for Aurora to abandon its underperforming recreational cannabis business in a pivot towards its more successful medical pot operations. Such a move, he said, would make the company an attractive acquisition target.
“With leadership in domestic medical, and status as Canada number one exporter, we think the company’s non-rec franchise could be attractive to those consolidating the industry,” he wrote.
Aurora CEO Miguel Martin threw cold water on the idea in May, when he spoke to Yahoo Finance Canada about his company’s latest quarter.
Asked if he would consider a full pivot to medical he said, “I don’t believe so.”
“We’re still bullish on the future of rec and the profitability there,” he added. “We believe, and I believe strongly, that there is benefit to being a large diversified cannabis company.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.