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Canopy Growth still on track to hit $1 billion in sales: Constellation CEO

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Bottles of Constellation Brands Inc. Corona beer sit in the cooler of a bar in Ottawa, Illinois, U.S., on Tuesday, April 2, 2019. Photographer: Daniel Acker/Bloomberg via Getty Images
Bottles of Constellation Brands Inc. Corona beer sit in the cooler of a bar in Ottawa, Illinois, U.S., on Tuesday, April 2, 2019. Photographer: Daniel Acker/Bloomberg via Getty Images

Constellation Brands Inc.’s (STZ) chief executive is standing behind his bet that Canopy Growth Corp. (WEED.TO) can reach $1 billion in annual sales next year.

Speaking on a conference call with investors on Thursday following the beer and wine-maker’s fourth-quarter earnings, Bill Newlands said he expects Canopy Growth to benefit from more brick-and-mortar retail stores coming online in Canada and the roll-out of vape, edible, beverage products in that market next fall.

“We are working closely with Canopy Growth on a focused, long-term strategy to win markets and form factors that matter while paving a clear path to profitability,” Newlands said on the call. “We are confident in their ability to achieve the previously communicated run rate of $1 billion next year.”

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A company’s “run rate” is an extrapolation of current financial performance, and assumes that current conditions will continue.

The Smiths Falls, Ont.-based cannabis producer reported $83 million in net revenue in its fiscal third quarter, up 282 per cent from a year earlier.

Constellation Brands invested $5 billion in Canopy Growth last year in a blockbuster deal that upped its ownership interest to about 38 per cent. In 2017, the New York-based beverage giant acquired about 9.9 per cent the company for $2.4 million.

If Constellation exercises all of its warrants, its ownership in Canada’s largest pot company would exceed 50 per cent. The warrants expire in November of 2021.

Constellation Brands reported an adjusted profit of $1.84 per share on sales of $1.80 billion in the fourth quarter, beating analyst expectations. The company said it expects fiscal 2020 comparable earnings per share in a range of $8.50 to $8.80, excluding Canopy Growth equity earnings, compared with $9.34 in fiscal 2019.

“Canopy’s business is rapidly evolving and their financial results will likely be volatile as they invest behind their growth opportunities,” Constellation Brands chief financial officer David Klein said on the call.

“As Canopy’s planning process for the next fiscal year is ongoing, and the Canopy equity earnings we recorded in our income statements are non-cash, we have not factored Canopy equity earnings into our fiscal 2020 guidance.”

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