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The Smith’s Falls, Ont.-based company said on Wednesday it will cut 17 per cent of its Canadian indoor cultivation footprint, and abandon its outdoor cannabis growing operation in Saskatchewan. Canopy said it will shut down sites in St. John's, NL, Fredericton, NB, Edmonton and Bowmanville, Ont.
Approximately 220 employees will be laid off as a result.
“These actions will be an important step towards achieving our targeted $150 to $200 million of cost savings and accelerating our path to profitability,” Canopy chief executive officer David Klein stated in a news release. “We are confident that our remaining sites will be able to produce the quantity and quality of cannabis required to meet current and future demand.”
The company said it expects pre-tax charges of approximately $350 to $400 million in the third and fourth quarters of fiscal 2021 as a result of the move.
The decision to further shrink operations in Canada is the latest in a series of cuts by Klein to bring the world’s most valuable cannabis company in line with a smaller-than-anticipated legal market. Since taking the top job in January, he has overseen a sweeping restructuring plan that eliminated scores of jobs prior to Wednesday’s announcement.
In March, the company said it would close two of its British Columbia greenhouses and stop construction on a greenhouse in Niagara-on-the-Lake, Ont., resulting in 500 lost jobs. In April, 200 workers were dismissed across Canada, the UK, and the United States. The company also pulled out of South Africa, Lesotho, and Colombia that month.
Canopy is not alone among major cannabis producers as it reduces headcount and scales back operations. In June, Aurora (ACB.TO)(ACB) announced plans to lay off 700 workers and close five facilities in order to lower costs. Tilray (TLRY) has also closed greenhouses and shed staff this year.
The trend is partly a response to a glut of inventory weighing on the sector. As of August, the latest month for which Health Canada has released data, cultivators and processors had amassed 782,698 kilograms of unpackaged dried flower inventory.
Toronto-listed Canopy shares fell 3.06 per cent to $35.74 at 12:57 p.m. ET.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.