Organigram Holdings Inc. (TSXV:OGI) expects to be cash-flow positive from operations at the outset of the launch of adult recreational legalization in Canada
SmallCapPower | July 25, 2018: Organigram Holdings Inc. (TSXV:OGI), the parent company of Organigram Inc., is a leading producer of medical marijuana based in Moncton, New Brunswick, which has already attained its marijuana supply license from Health Canada. On Monday, Organigram reported that it is in the final stages of planting the remaining three of the 16 three-tier Phase 3 cultivation rooms.
The Phase 3 expansion would increase Organigram’s target dried flower equivalent production capacity from an estimated 22,000 kg/annum to 36,000 kg/annum. Staggered harvests from Phase 3 are expected to begin in late August. The advantage with the Phase 3 is that it doesn’t require a new license from Health Canada, as it is a part of the existing Moncton facility. The additional capacity will help ensure product is available for sale when the adult recreational market launches.
In addition, Organigram has received licensing on a second harvest room, which allows the Company to automate its harvesting process. The Company has also received licensing on new automated potting and waste shredding rooms.
Organigram CEO Greg Engel said, “We are pleased to successfully complete our latest expansion project on time and on budget to meet the needs of the existing domestic and international medical market as well as the launch of the recreational adult-use market in Canada on October 17, 2018.”
Organigram reported the commencement of Phase 4 expansion project, which is bifurcated into three stages, though the construction would be completed concurrently in 2018 and 2019. Phase 4a, which will house 31 grow rooms, will be operational by April 2019, increasing the Company’s target production capacity to 62,000 kg/yr. Phase 4b, housing 32 grow rooms, is expected to be ready by August 2019, increasing the target production capacity to 89,000 kg/yr.
Construction for Phase 4c, with 28 grow rooms, is expected to break ground in January 2019, which will bring target production capacity up to 113,000 kg/yr. The rooms will be available to Organigram by October 2019. The total estimated cost for all the three phases is $180 million. Phases 4a and 4b have been budgeted at approximately $70 million and Phase 4c at $40 million. Included in the cost of the Phase 4a and 4b budget is a $4 million dedicated substation with peak power capacity of 40 megawatts.
Organigram has enough cash on hand to fund all three stages of Phase 4 expansion and expects to be cash-flow positive from operations at the outset of the launch of adult recreational legalization in Canada in October.
Organigram Holdings trades at a market capitalization of $589.9 million with a price to book multiple of 3.66x.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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