Organigram Holdings Inc., a leading Canadian cannabis producer, reported a net loss of $248.6 million for the fiscal year 2023, which ended on September 30. This is a significant increase from the net loss of $14.3 million in the previous fiscal year.
Impairments and write-offs weigh on the bottom line
The main reason for the huge net loss was the impairment of property, plant and equipment (PP&E), intangible assets, and goodwill, which amounted to $232.5 million. The company said that these impairments were due to the changing market conditions, regulatory uncertainties, and COVID-19 impacts.
The company also incurred a write-off of $8.6 million related to the termination of a supply agreement with Canndoc Ltd., an Israeli medical cannabis producer. The agreement was terminated due to Canndoc’s inability to obtain the necessary regulatory approvals and licenses.
Revenue increases by 11% driven by recreational and international sales
Despite the net loss, the company reported a 11% increase in net revenue, which reached $161.6 million in 2023. This was mainly driven by the growth in recreational and international sales, as well as an extended reporting period of 13 months.
The company’s recreational revenue increased by 18% to $127.4 million, representing 79% of the total net revenue. The company attributed this growth to its innovation excellence and industry-leading R&D, which resulted in the launch of 143 new products in 2023.
The company’s international revenue increased by 25% to $18.9 million, representing 12% of the total net revenue. The company exported medical cannabis to Germany, Israel, Australia, and the UK, and signed new supply agreements with 4C Labs and Sanity Group.
Adjusted EBITDA improves slightly but remains low
The company’s adjusted EBITDA, which excludes the impact of impairments, write-offs, and other non-cash items, improved slightly from $3.5 million in 2022 to $6 million in 2023. However, this still represents a low margin of 3.7% of the net revenue.
The company said that its adjusted EBITDA was affected by several factors, such as lower selling prices, higher production costs, increased marketing and R&D expenses, and COVID-19 related costs.
Outlook and strategic initiatives
The company said that it expects to see continued revenue growth and margin improvement in 2024, as it focuses on enhancing its product portfolio, reducing its production costs, expanding its international presence, and pursuing strategic partnerships.
The company also announced a $124.6 million strategic investment from British American Tobacco (BAT), which will give BAT a 19.9% stake in the company and allow for collaboration on product development and innovation. The first tranche of $41.5 million was completed in January 2024.
The company also made strategic investments in Greentank, a vape hardware company, and Phylos, a US-based cannabis genetics company, to access cutting-edge technology and exclusive cultivars.
The company also completed the expansion of its Lac-Supérieur facility, which will produce craft cannabis, and applied for EU-GMP certification of its Moncton facility, which will enable exports to the European market.
Market position and share performance
The company said that it achieved the #2 market position among Canadian licensed producers in 2023, driven by its success in several product categories, such as pre-rolls, gummies, hash, and milled flower. The company also held the #3 market position in Ontario, Quebec, and the Atlantic Canada.
However, the company’s share price declined by 6.17% on December 19, 2023, the day it released its 2023 results. The company’s share price has also underperformed the industry average, losing 21.43% since the beginning of 2024.
