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Tuesday, May 30, 2023
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.


Canopy Growth lays off 800 workers to reduce costs by $160M

Net revenue of $101 million during the third quarter of 2023 declined 28 per cent compared to last year

Canopy Growth lays off 800 workers to reduce costs by $160M this year
Canopy's Hershey Drive facility in Smiths Falls, Ontario. Photo via Canopy Growth.

Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) will lay off 800 workers due to the company’s new business model and shutting down more of its production operations.

On Thursday, the cannabis company announced that it will close its Hershey Drive facility in Smiths Falls, Ontario and reduce headcount across the business by 35 per cent and 60 per cent of its operational facilities.

The initiatives will reduce annual costs of goods sold selling, general and administrative (SG&A) expenses by a combined $140$160 million over the next 12 months, bringing the total cost reduction target to $240$310 million including the reductions announced April last year.

“Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership,” said Canopy’s CEO David Klein.

“These changes are difficult but necessary to drive our business to profitability and growth,” he added.

The company said its new approach will focus on a third-party sourcing model focusing on cannabis extractions for beverages, edibles, vapes and extracts.

Last year, Canopy announced its divestiture away from Canadian retail operations as well as some organizational restructuring and the closure of its Scarborough, Ontario research facility.

The company also continues to move forward with its U.S. strategy via its subsidiary Canopy USA, LLC.

The move received backlash from industry experts and local Parliament Members online.

Scott Reid, M.P. for Lanark-Frontenac-Kingston said in a statement blaming the federal government for the reasons the cannabis industry is failing and giant cannabis companies continue to present losses.

“Unreasonably high taxation and a high-cost regulatory burden that drives up the compliance costs
of licensed cannabis producers without a commensurate benefit for public safety,” Reid said.

“For five years, cannabis producers have lobbied for a more reasonable and business-friendly approach to regulating their industry.”

Read more: Canopy Growth completes divestiture of Tweed and Tokyo Smoke retail operations

Read more: Canopy Growth reports Q2 revenue increase of 7% to $118M

Besides the shutdown and layoffs announcement, the company released its financial statements for the third quarter and saw a decline in revenue of 4 per cent sequentially to $84.4 million. It reported a loss of $87.5 million from $67.4 million in the previous year.

Net revenue of $101 million during the third quarter of 2023 declined 28 per cent compared to last year.

Canopy Growth lays off 800 workers to reduce costs by $160M this year

Table via Canopy

According to Canada Revenue Agency data, Canopy received over $69 million in government funding because of massive amounts of cannabis accumulated in the market.

CFO Judy Hong said the right sizing of its Canadian business is expected to reduce the company’s cash costs significantly.

“Canopy is firmly on the path to deliver at least quarterly breakeven adjusted EBITDA in our Canadian cannabis business in Fiscal 2024, even at current revenue run-rate,” Hong explained.

Canopy stock dropped by 16.08 per cent to $3.08 on the Toronto Securities Exchange.


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