CannTrust Holdings Inc (NYSE:CTST)(TSX:TRST) released an update on Monday on how The Company did during its most recent quarter, which ended March 31. Investors will recall that the stock did poorly when its Q4 earnings results failed to meet analyst expectations. With the share price still struggling, The Company has tried to inject some life with an update in the hopes of bringing some excitement back to the stock.
Although CannTrust is still working on its close process for Q1, in the update, The Company noted that it expected net revenues to come in at $17 million. That’s very similar to the $16 million that CannTrust reported in Q4, although it’s a big year-over-year increase of 116%. Gross margins are also expected to come in at a very strong range, between 42% to 46%. The good news is that The Company also expects net income before taxes to be between $12 million to $14 million, which is a big improvement from the $29 million pre-tax loss that it incurred last quarter.
Another positive is that CannTrust is reporting higher revenue per dry gram, averaging $5.57 compared to $4.89 in Q4. However, it’s still well down from the $7.27 that The Company was averaging a year ago.
On track to complete expansion
CannTrust also updated investors on its Phase 2 expansion, which recently received approval from Health Canada for the final 20%. The expansion is now fully licensed and The Company anticipates it will be complete and ready for full production by the end of Q2 this year. Annualized production from the expansion is expected to be 50,000 kg.
CannTrust is also looking to build on its capacity through outdoor growing capabilities as well. The Company purchased 81 acres worth of land in B.C. which it plans to use for growing cannabis outdoors. However, it’s important to note that while CannTrust will have more capacity as a result of outdoor growing, The Company says that “Production from outdoor cultivation will be primarily used for extraction purposes, including for products that the Company soon expects Health Canada to approve for recreational use, including edibles and inhaled extract products.”
Takeaways for investors
It’s not typical that a company will release some of its results before its close process is even done. It suggests to me that CannTrust is trying to do some damage control and convince investors that things aren’t as bad as they appeared in its most recent quarter. The problem is that without a full and accurate picture, the update is going to be taken with a grain of salt. While we can say that CannTrust looks to be on track to record a good profit for the start of the new fiscal year, we don’t know all the details to see how that all happened.
Despite the update by CannTrust, the stock was down in trading on the news as it was also accompanied by a release that The Company was planning to issue more shares to help fund its operations. As well as The Company may be doing on the income statement, the public offering suggests that cash flow may still not be all that great.