Aphria Inc: Future Seems Bright Following Impressive Financial Results

Aphria Inc. (TSX: APH) reported strong growth in revenues and continued positive EBITDA for the seventh consecutive quarter

SmallCapPower | July 13, 2017: Aphria Inc. (TSX: APH) Wednesday reported outstanding full-year results, with revenues surging 142.3% to $20.4 million and EBITDA zooming almost 10x to $6.1 million on lower production costs. Net income for the year ended May 31, 2017, was $4.2 million, or $0.04 per share, versus net income of $0.4 million, or $0.01 per share, in the prior year. Included in the net income for the 2017 year was a gain on the Company’s investment portfolio of almost $3.6 million and a write-off of the Company’s intangible asset, related to its CannWay brand, of $3.5 million. Following the results, Aphria shares jumped 14% to close at $5.94 on July 12, 2017.

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Quarterly revenues rose 106% to $5.7 million as compared with $2.8 million in the prior year quarter, mainly attributable to higher production levels. Aphria sold 738.3 kgs of cannabis (above its expected quarterly production of 650kgs), driven primarily by the exceptional March and May harvests. During the quarter, “all-in” costs of dried cannabis per gram decreased from $2.23 to $1.67, due to the improved growing techniques. Despite robust revenue growth and reduced costs, Aphria reported a net loss of $2.6 million compared to a net income of $1.3 million in the prior year quarter. The decrease in net income was directly related to the more than $5.5 million net loss on the Company’s strategic investments in the quarter.

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Aphria CEO Vic Neufeld said, “We increased our capacity expectations, continued to license the use of the Aphria Know-How System to expand our proven operational expertise, made progress on our expansion into the U.S. market – all while maintaining our commitment to delivering clean and safe cannabis. The investments and progress we made in 2017 have positioned Aphria for continued profitable growth, in both the short and long term.”

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We believe going forward Apria will continue to deliver solid results, which will be driven by investments in its recreational brand, capital investment plans and expansions through acquisitions.

In terms of valuation, Aphria currently trades at price to TTM sales of 45.09x, Price to Book of 3.98x, and trailing PE of 66.71x.

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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