Aphria's bleak start to earnings triggers slump in pot stocks

(Reuters) - Canada's Aphria Inc reported a loss for the third quarter on Monday as it reeled from fresh coronavirus lockdowns in parts of Canada and Germany, sending its shares down 14% and weighing on other pot producers.

While the pandemic has lifted demand for weed from customers staying at home, sales of cannabis producers suffered during the latest round of restrictions in key markets such as Ontario and Alberta as pot stores were forced to shut.

"The provincial lockdowns were more impactful, particularly in Canada, than we initially expected," Aphria Chief Financial Officer Carl Merton said on a post-earnings call.

The company's revenue fell 4.3% sequentially to C$153.6 million ($122.32 million), missing a Stifel estimate of C$162.8 million.

Aphria's earnings are "setting the tone for what is going to be a difficult earnings season for the Canadian producers," Stifel analyst Andrew Carter wrote in a note.

Shares of rivals Canopy Growth Corp, Aurora Cannabis Inc and Cronos Group Inc fell between 4% and 8%. Tilray Inc, which is being bought by Aphria, slid 13%.

Aphria said provincial cannabis boards, which buy cannabis from private companies for sales at government-run retail stores, have also been lowering their inventory - a practice known as "destocking".

It said provincial governments had lowered their orders for cannabis and returned product worth around C$5 million, signaling that market growth is expected to be weaker than previously forecast.

The Ontario-based company also said that customers' buying preferences had shifted to cheaper products, such as cannabis flower and oils, which hit the price for its adult-use products and margins.

It posted a net loss of C$361 million for the quarter ended Feb. 28, compared with a profit of C$5.7 million a year earlier.

($1 = 1.2557 Canadian dollars)

(Reporting by Arunima Kumar in Bengaluru; Editing by Aditya Soni)