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Canopy Growth expects to turn profitable next fiscal year; shares jump

(Reuters) - Canopy Growth Corp's WEED.TOCGC.N chief David Klein expects the world's largest pot producer to become profitable in fiscal 2022, after years of booking massive losses, pushing its shares to their highest in over a year.

FILE PHOTO: A worker weighs a package of dried marijuana at the Canopy Growth Corporation facility in Smiths Falls, Ontario, Canada, January 4, 2018. REUTERS/Chris Wattie

The company posted a smaller quarterly loss on Monday, buoyed by cost cuts and more people turning to cannabis to cope with the coronavirus lockdowns.

Klein’s remarks could help placate investors frustrated with a lack of profits at Canadian cannabis producers, which forced Canopy and its rivals to close plants and lay off hundreds of employees earlier this year.

The comments come months after Canopy suspended its full-year outlook and withdrew a similar profitability target in May, citing uncertainties from the COVID-19 pandemic.

“We plan to provide our medium-term financial targets when we report our Q3 earnings in February, but I’m confident we’re now firmly on a path to achieve positive adjusted EBITDA at some point next fiscal year,” Klein said.

The company said it will cut spending by as much as C$200 million over the next two years by restructuring its facilities, reducing headcount and other measures.

Canopy’s shares rose more than 8%, after jumping 25% over the last week on U.S. election enthusiasm.

Ontario-based Canopy’s total selling, general and administrative expenses fell 18.9% in the second quarter ended Sept. 30 from a year earlier. Gross margins jumped 19% from 5%, and the company said it remains committed to improving it to 40% over time.

On an adjusted basis, losses before interest, taxation, depreciation and amortization shrank to C$85.7 million ($65.86 million) from C$150.4 million a year earlier.

Revenue rose nearly 77% to C$135.3 million, beating analysts’ average estimate of C$116.5 million, according to IBES data from Refinitiv, as more people turned to weed for both recreational and medical usage.

Reporting by Rithika Krishna and Shariq Khan; Editing by Shinjini Ganguli

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