Aphria Stock Climbs on Expansion Update

Aphria Inc.’s (TSX:APH) expansion adds 200,000 sq ft of production space and triples Aphria’s production capacity from 9,000 kg to 30,000 kg annually

SmallCapPower | April 6, 2018: Aphria Inc. (TSX:APH) Thursday provided an operational update on Part III expansion of its Leamington facility. The update follows Health Canada approval, which was announced on March 13, 2018. The expansion adds 200,000 sq ft of production space and triples Aphria’s production capacity from 9,000 kg annually to 30,000 kg annually. After falling ~50% this year Aphria stock jumped 10% on Thursday to close at $10.90 on the TSX. The surge seems to be largely market and sector related rather than a strong reaction to the operational update news. While the TSX rose 1.26%, or 192 points, Thursday, a majority of the Canada-listed marijuana stocks closed much higher, with Aurora Cannabis’ 10% gain leading the Top 3.

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Key highlights of the Part III expansion operational update include full capacity with weekly crop harvests of 10,000 plants; first harvest expected in the last week of April; and yields of 380-400 kg per week. At full rotation, the Part III expansion will house production from ~80,000 plants for a total annual yield of 30,000 kg.

Known as Aphria One, the Leamington facility has so far completed 300,000 sq ft of production space in three phases of production expansion. The ongoing Part IV 700,000 sq ft expansion, expected to be completed in early 2019, will take the total space to more than 1,000,000 sq ft of production space with an annualized capacity of 100,000 kg. Additionally, production of 120,000 kgs from Aphria’s recent collaboration with local greenhouse grower Diamond Farms and 10,000 kgs from its B.C.-based subsidiary Broken Coast Cannabis, would take the total production capacity to 230,000 kg per year by early 2019. Cannabis producers, including Aphria, are scrambling to boost production capacity to meet the sizable opportunity opening up for recreational cannabis in mid-2018.

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Aphria is one of Canada’s lowest-cost producers of cannabis, with cash costs of $1.45 per gram of dried cannabis in Q2 FY2018. Aphria currently trades at a market cap of $2.3 billion, or 89.64x its TTM sales of $25.46 million.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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