Canopy Growth Corp. will lay off 800 workers as part of a transformation plan that will see the company close a former Hershey chocolate plant it took over and consolidate some of its cultivation operations.
The Smiths Falls, Ont., cannabis company said Thursday that the layoff will impact 35 per cent of its workforce, with 40 per cent of the cuts happening immediately and the remainder taking place over the next several months.
The move is meant to help the company behind brands like Tweed, Quatreau, Doja and Ace Valley reach profitability and enable sustainable and long-term growth. Both have become difficult because the illicit market still captures about 40 per cent of all pot sales and the Canadian cannabis sector is valued below the $7 billion that was once projected, said David Klein, Canopy Growth’s chief executive.
“We expect the sector challenges to remain for years to come and as a result, the sustainability of this legal sector is in question,” he said Thursday on a call with analysts.
Canopy’s share price tumbled almost 17 per cent to $3.06 at the closing bell after the company revealed its net loss amounted to $266.7 million or 54 cents per diluted share for the third quarter, which ended Dec. 31. The result compared with a net loss of $115.5 million or 28 cents per diluted share in the same quarter a year earlier.
The loss was driven primarily by non-cash, fair-value changes and an increase in asset impairment and restructuring costs, Canopy said.
Net revenue for the quarter totalled $101.2 million, down from $141.0 million a year earlier.
As a result of the measures announced Thursday, Canopy will take a pre-tax charge between $425 million to $525 million, but hopes to achieve savings between $140 and $160 million in the next 12 months.
Staffing cuts to cultivation, manufacturing and other areas of operations will deliver $45 to $50 million in annualized cost of goods sold savings alone, said Judy Hong, the company’s chief financial officer, on the same call as Klein.
Other savings will come from winding down operations at 1 Hershey Dr. in Smiths Falls, just south of Ottawa, where chocolate company Hershey once had a factory.
One Hershey, Canopy’s headquarters, was the company’s main site for flower and edibles production, but also housed office space.
The company will now complete post-production flower activity at 99 Lorne St., which is across the street from 1 Hershey and already has a regional distribution centre, bottling facility and beverage capabilities.
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