The Canadian cannabis stocks we’ve dug up are notably efficient on a domestic gram production capacity/square footage basis
SmallCapPower | May 22, 2019: Production efficiency can be defined as the ratio of output produced by a process to the total energy or resources expended to produce that output. When looking at cannabis companies, one way to gauge how efficient they are is by looking at the ratio of grams produced to the square footage of production facilities. This can provide an outlook on how efficiently a company is using their facility given its size to maximize their cannabis output. Today we’ve identified four Canadian cannabis stocks that have notably efficient domestic operations, based on estimated domestic gram production capacity divided by the sum of the square footage of all their domestic production facilities.
*Share prices as at close Friday, May 17, 2019, data obtained from S&P Capital IQ
Organigram Holdings Inc. (TSXV:OGI) – $10.72
Organigram Holdings is a licensed producer of cannabis and cannabis-derived products in Canada. The Company produces high quality, premium products for medical and recreational consumers. Organigram has a strong brand portfolio, including The Edison Cannabis Company, Ankr Organics, Trailer Park Buds and Trailblazer. On May 20, 2019, Organigram announced a $15 million investment in a fully automated production line with the ability to produce 4,000,000kg of chocolate cannabis edibles per year. Organigram expects the production line to be in full operation by the fall. On April 30, 2019, Organigram announced that it has received an expanded cultivation license from Health Canada in line with its previously-announced Phase 4A and 4B expansion plans for its Moncton Campus.
- Market Cap: $1.6 Billion
- YTD Return: 134%
- Domestic Square Feet: 232,000
- Estimated Current Capacity (grams): 36,000,000
- Domestic Yield/Square Foot: 155 grams/sq. ft
Cronos Group Inc. (TSX:CRON) – $20.07
Cronos Group is a globally diversified and vertically-integrated cannabis company with a presence in five continents. The Company operates two wholly-owned Canadian licensed producers: Peace Naturals Project Inc. and Original BC Ltd. Peace Naturals is a global health and wellness platform, while Original BC is a recreational adult-use Canadian licensed producer based in Okanagan Valley, BC, which owns brands such as Cove and Spinach. Cronos Group intends to continue to rapidly expand its global footprint as it focuses on building an international iconic brand portfolio as well as developing disruptive intellectual property. On May 9, 2019, Cronos Group reported its first-quarter 2019 financial results. Net revenue surged 120% YoY to $6.5 million on the back of the launch of the adult-use recreational market in Canada. About 1,111 kilograms were sold in first quarter of 2019, representing a 122% YoY increase, driven primarily by increased cannabis production and the launch of the legal recreational market in Canada. Gross profit came in at $13.3 million, with a gross margin of 206%. Net income attributable to Cronos Group shareholders was reported at $427.8 million, as compared to loss of $1.1 million in Q1 2018.
- Market Cap: $6.6 Billion
- YTD Return: 49%
- Domestic Square Feet: 355,500
- Estimated Current Capacity (grams): 40,150,000
- Domestic Yield/Square Foot: 113 grams/sq. ft
Aurora Cannabis Inc. (TSX:ACB) – $11.71
Aurora Cannabis is a licensed distributor and producer of medical marijuana. The Company expects to have approximately 1,000,000 sq. ft. of licensed production space and produce 270,000 kg of cannabis annually. Aurora intends to convert several existing outlets, as well as develop new stores, for the sale of cannabis to the recreational market. The Company has signed supply agreements with 12 provinces and territories, making up over 98% of the Canadian population. On May 14, 2019, Aurora reported its third-quarter financial results. The results featured a loss per share of $0.16, missing analysts’ estimates by $0.06. Reported revenue was $65.1 million, increasing 20% from Q2, and adjusted EBITDA improved by 20% to a loss of $36.6 million.
- Market Cap: $11.9 Billion
- YTD Return: 73%
- Domestic Square Feet: 1,380,200
- Estimated Current Capacity (grams): 150,000,000
- Domestic Yield/Square Foot: 109 grams/sq. ft
Canopy Growth Corporation (TSX:WEED) – $60.04
Canopy Growth is the largest cannabis company listed by market cap on the TSX and NYSE. The Company has the largest licensed production platform in Canada, with over 600,000 sq. ft. of production space. The Company has also secured the necessary agreements to export medicinal cannabis to Australia, Brazil, and Germany. On May 2, 2019, Canopy announced their acquisition of C3 Cannabinoid Compound Company, a Germany-based manufacturer and distributor of dronabinol.
- Market Cap: $20.7 Billion
- YTD Return: 66%
- Domestic Square Feet: 4,400,000
- Estimated Current Capacity (grams): 440,000,000
- Domestic Yield/Square Foot: 100 grams/sq. ft
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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