Analysts have predicted that ABC would lose $0.19 per share (0.25 Canadian dollars, and this was a pro forma projection) on sales of $41.5 million â€” around CA$53.7 million â€” in the third quarter.
ABCâ€™s revenues surpassed analyst expectations. Sales fell just 9% to CA$50.4 million in the quarter, with consumer cannabis sales down 43% but therapeutic marijuana sales are up 8%. This sales total from yesterday night, I believe, accounts for today’s investor euphoria for ABC and its colleagues.
The news was less encouraging in terms of earnings. According to ABCâ€™s SEC filing, the firm lost around CA$1 billion in fiscal Q3, which is a significant amount of money for a company valued at less than half a billion dollars and works out to roughly CA$4.72 per share. ABC didn’t even try to compute per-share losses in its earnings announcement, preferring to present its financial results as adjusted profits before interest, taxes, depreciation and amortization (EBITDA), by which metric its losses seemed to be less â€” at CA$12.3 million.
To be honest, despite the reasonably positive sales report, considering how much money ABC continues to lose, I’m not certain that the investors bidding up shares of CGC or SNDL (or ABC itself) on these news are making the correct decision.
ABC did, however, try to capitalize on its “sales beat” by announcing that it is doubling down on cost-cutting and plans to lower its operational costs by CA$150 million to CA$170 million annually by fiscal Q1 2023. (or in other words, before the end of this calendar year). ABC further indicated that by the end of the year, it aims to reach “adjusted EBITDA profitability.” ABC highlighted that gross margins in the medicinal marijuana industry rose throughout the quarter, even as profit margins in the consumer cannabis sector continued to decline.
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