Aurora Cannabis Loses $238M in Q2 as Margins Shrink


One of Canada’s top cannabis producers, Aurora Cannabis Inc (TSX: ACB)(NYSE: ACB), released their much anticipated Q2 financial results Monday. While companies have seen exploding revenue and growth figures, something which Aurora has seen thanks to their aggressive expansion and M&A strategy, the company still isn’t profitable as it loses C$238 million in their second quarter.

While net revenue increase to $54.2 million, up 83 percent from last quarter and up 363 percent last year in 2018, overall selling prices were negatively impacted through excise taxes introduced back in October of last year. Regardless, Aurora in total ended up with a $238 million loss for Q2, a far cry from the $62 million most analysts expected the company would lose this quarter, according to CBC.

Most of this was attributable to the declines in gross margins on cannabis sales, falling from 70 percent down to 54 percent. Asides from other reasons, such as excise taxes and lower average selling prices, it appears that regular cannabis products will be less profitable with lower margins. In response, Aurora has been anticipating a new launch of CBD derivative products with higher margins to enter the markets once approved by Health Canada. These include various edibles, beverages, vaping devices, and topical oils, which won’t’ be legal until later this year.

“Aurora continues to execute strongly across all of its market segments, as demonstrated by the 83% revenue growth over last quarter and the significant increase in confirmed production results,” said Terry Booth, CEO of Aurora. “Our brands continue to resonate extremely well in the consumer market, our patient numbers continue to increase steadily, and we have maintained our market leadership in Germany and other key international markets. We are experiencing exceptional demand for our Canadian medical and consumer products, as well as sustained strong demand internationally. With our Aurora Sky and MedReleaf Bradford facilities ramping up production as anticipated and our other licensed facilities operating at full capacity, we are reiterating our earlier guidance of achieving sustained EBITDA positive results from the second calendar quarter of this year (our fiscal Q4).”

The company also claimed that it sold around 20 percent of Canada’s total cannabis legally available. While these figures are impressive from a sheer growth standpoint, the higher than expected losses, coupled with numerous dilutions through all stock acquisitions, is leaving a sour taste in the mouth of many shareholders.

Traders reacted negatively to the news, with Aurora’s shares dropping just under 5 percent in today’s trading session. Many investors are moving away from favoring growth figures and are instead more interested in profitability, something that many of these aggressively expanding cannabis giants don’t have.

Aurora Cannabis Company Profile

Headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 500,000 kg per annum and sales and operations in 20 countries across five continents, Aurora is one of the world’s largest and leading cannabis companies. Aurora is vertically integrated and horizontally diversified across every key segment of the value chain, from facility engineering and design to cannabis breeding and genetics research, cannabis and hemp production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution. – Aurora