HEXO Corp is on Top of the Cannabis Demand Surge: Company

HEXO Corporation (TSX:HEXO) says it has delivered on all its cannabis orders and was also able to replenish stock across Canada

SmallCapPower | October 24, 2018: HEXO Corporation (TSX:HEXO) Monday reported that it has ample leeway to support the growing demand for cannabis in Canada. The Company, being a preferred supplier with the Société québécoise du cannabis (SQDC), has delivered on all its cannabis orders and was also able to replenish stock across the country.

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Post the legalization of recreational cannabis consumption last week, meeting the unexpected demand surge was a challenge for many Licensed Producers. Actual demand far exceeded the expectations, which is a huge positive for companies such as HEXO. There has been a shortage of products across Canada, but the availability of HEXO products has been reliable. HEXO says it produced enough high-quality dried flower, oils, milled flower and pre-rolled cones to meet the initial demand and to send resupply shipments ahead of schedule, ensuring stores and distribution centers have undisrupted access to products. The Company reported that its production is at full capacity to meet the demand and has increased shipping to several times over the weekend.

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HEXO is one of the lowest-cost producers and is boosting its production capacity to support the growing demand for cannabis products. The Company currently operates a 310,000 sq. ft. production facility and is in the process of developing a 1.0 million sq. ft. greenhouse on its Gatineau property, which will be completed by the end of 2018. Total production for both the facilities will amount to 108,000 kilograms of dried flower on an annual basis.

Jean-François Bergeron, Vice-President of Supply Chain, Société des alcools du Québec, said “HEXO has risen to the challenge of a much higher than anticipated demand during the first few days of legalization, and we are very pleased with their responsiveness. Thanks to HEXO’s preparedness, we have been able to provide and maintain customer service to the SQDC’s clients, even with this higher demand.”

HEXO CEO and Co-founder Sébastien St-Louis said, “We’ve been focused on executing all of our plans for several weeks, and I am proud that our team’s dedication and capability has meant that customers’ access to HEXO product has been dependable. Sales have been good, and we’ve been able to keep up.”

HEXO Corporation stock trades at a market capitalization of C$1.14 billion with a price-to-book multiple of 3.6x.

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

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