When the approximately 400 Organigram (OGI.TO)(OGI) workers laid off in response to COVID-19 will be allowed to return to their jobs will depend in part on “growth in the market,” according to the cannabis producer’s chief executive officer.
Greg Engel said on Tuesday that while the layoffs are expected to be temporary, there are considerations beyond the direct safety of workers.
“The timeframe and keys of how we bring employees back is going to be dependent on kind of the growth in the market back in place,” he said on a conference call with analysts following the release of the company’s second quarter earnings. “It is our intention to bring them back.”
Moncton, N.B.-based Organigram announced its plan to temporarily reduce its workforce by approximately 45 per cent on April 6, citing the impacts of COVID-19. The layoffs were initiated on March 24. The company said it offered lump-sum payments to those impacted, resulting in a one-time charge of about $600,000.
The long-term impact of the COVID-19 pandemic on cannabis consumption and purchasing habits has yet to be seen. Early indications suggested many were stocking up to get through a lockdown. The provincially-run Ontario Cannabis Store (OCS) said in March that it received 80 per cent more orders than average on one Saturday. However, a BMO Capital Markets analysis of OCS inventory data released on the final day of that month found the sales bump was short-lived.
The Ontario government initially ruled physical pot shops an essential business before ordering them closed aside from click-and-collect and delivery sales. Sales at Prince Edward Island’s legal cannabis stores have taken a hit, reportedly dropping close to 70 per cent since turning online only last month.
Organigram, however, expects more Canadians staying at home to be positive for pot sales. Engel said the pandemic has limited the opportunities people have to spend their entertainment budget, and cites major ice storms and power outages where alcohol sales spiked as an indication of robust sales on the horizon.
“The demand is there,” Engel said. He notes that one large province recently re-ordered Organigram vape pens before the initial shipment hit store shelves.
The cannabis industry in Canada saw a rash of mass layoffs, asset sales, warnings about oversupply and too much cultivation capacity prior to the significant onset of COVID-19 in North America. Other companies, such as Alberta-based Sundial Growers (SNDL), have instituted temporary layoffs and paused cultivation in response to the virus.
In the three months ended Feb. 29, Organigram said its harvest increased 65 per cent year-over-year. Kilograms sold fell four per cent over the same period. The company reported a net loss of $6.8 million or 4.1 cents per share. Net revenue fell to $23.2 million from $26.9 million a year earlier. Organigram also said it has about $41.2 million in cash, and is in non-compliance with a financial covenant it secured from the Bank of Montreal.
"Our second-quarter results reflect continued execution despite ongoing industry challenges," said Engel in a statement.
Toronto-listed shares fell nearly 11 per cent in mid-afternoon trading.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.