Q2 2017 Financial Results and Provides Operational Update
Q2 2017 Financial Results and Provides Operational Update
TORONTO, Aug. 28, 2017 /CNW/ – Cronos Group Inc. (TSXV:MJN) (OTC: PRMCF) (“Cronos” or the “Company”) is pleased to report the financial results and accompanying management discussion and analysis for the quarter ending June 30, 2017; copies are available on the Company’s website (www.thecronosgroup.com) and have been filed with SEDAR (www.sedar.com).
In Q2, Cronos remained focused on executing against the Company’s operational strategy, which resulted in a 25% increase in sales quarter over quarter: $643k in Q2 vs $514k in Q1. Overall, the quarter produced $174,879 in positive net income from operations with a realized $1.3M gain in net income from non-core investments.
Domestic sales contributed 77% to the topline in the quarter. During the period, the Company commanded a domestic average selling price of $9.50 per gram, which reflected the improvement in product quality across both Peace Naturals Project Inc. (“Peace”) and In the Zone Produce Ltd. (“ITZ”).
Cost of Goods Sold (“COGS”) continued to decline to $2.18 per gram in Q2 following multiple operational upgrades from Q1. Of the three existing production facilities at Peace, Building Two (“B2”) was the only Peace facility where product was harvested in the quarter. The other facilities were undergoing significant upgrades. Management expects COGS to continue to decline with scale as the other two facilities ramp up production.
During the quarter, Company repaid a $4M mortgage to Romspen. Subsequently Romspen agreed to provide a $40 million senior secured facility to Cronos on August 24th that will fund ongoing expansion at Peace.
Additionally, during Q2, international sales grew by 27% quarter over quarter. Towards the end of Q2, demand in Germany increased substantially following German Parliament’s decision to implement health insurance coverage for eligible patients. As a result, Cronos continues to see increased demand in Germany, which has led to a product shortage. As one of two Canadian companies currently supplying product to this market, Cronos sees this as competitive advantage moving forward.
Since acquiring Peace, Cronos management has implemented significant facility upgrades and process improvements. The Company is now starting to realize the results of those efforts:
- Yields have dramatically improved, product offerings have increased, and metabolite profiles have gone up by as much as 44%.
- Margins have increased by reducing COGS and introducing more premium products.
Exports to Germany have grown, and the Company will continue to strategically allocate supply to establish international distribution channels.
- Completion of the first harvest in Building Three (“B3”), which is on track to be fully operational before the end of Q3. Under our perpetual harvest methodology, capacity is expected to dramatically increase with each subsequent B3 harvest.
- Retrofitted Building One (“B1”) at Peace with a two-tier rolling bench utilizing ITZ’s hydroponic growing methodology and an LED lighting system.
- Completed a state-of-the-art commercial oil production lab, which will be fully functional following final approval from Health Canada in September. The laboratory will capitalize on efficiency upgrades to produce cannabis oils utilizing existing extract-grade inventory.
- Secured $40M in non-dilutive, flexible mortgage financing to fund the expansion at Peace.
Construction of the 315,000-square foot expansion is progressing well and is on schedule.
- The 28,000-square foot greenhouse is expected to be operational in Q4.
- Weekly video updates of our construction progress are available on Twitter @CronosGroupMJN.
“It’s been less than a year since Cronos acquired Peace and we’re just beginning to see the results of the work we’ve put in. I expect Q3 to be the most successful quarter in our company’s history, and I have no doubt that that momentum will continue into 2018 and beyond,” says Mike Gorenstein, Cronos Group CEO.
About Cronos Group
Cronos Group, is a geographically diversified and vertically integrated cannabis company that operates two wholly-owned Licensed Producers (“LPs”) regulated within Health Canada’s Access to Cannabis for Medical Purposes Regulations (the “ACMPR”) and holds a portfolio of minority investments in other Licensed Producers. The Company’s flagship LPs, Peace Naturals Project Inc. (Ontario), and In The Zone Produce Ltd. (British Columbia) are collectively situated on over 125 acres of agricultural, licensed land. Cronos Group is focused on building an international iconic brand portfolio, providing patients with compassionate and personalized care, and creating value for our shareholders.
This news release may contain “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian securities legislation. All information contained herein that is not clearly historical in nature may constitute forward-looking information. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies that may cause actual financial results, performance or achievements to be materially different from the estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. Except as required by law, Cronos Group disclaims any obligation to update or revise any forward-looking statements. Readers are cautioned not to put undue reliance on these forward-looking statements. This news release contains information obtained by Cronos Group from third parties. Cronos Group believes such information to be accurate but has not independently verified such information.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
The Cronos Group.
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