Ontario-based cannabis producer Canopy Growth Corp. (TSE: WEED) (NASDAQ: CGC), has reduced its workforce by approximately 8 per cent to cut down operating costs and steer the struggling company toward profitability.
The layoffs total 245 people, as the company faces reduced sales and aims to generate up to $150 million in savings during the next 12 to 18 months.
The company has seen its market share drop from 11 per cent one year ago to 7 per cent in the January-March quarter.
“To realize profitability and power growth, we are taking critical actions to further evolve Canopy Growth into an agile organization with a clear focus on the areas where we have the greatest potential of success,” David Klein, Canopy Growth CEO, said in a statement.
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Canopy’s latest round of layoffs has resulted in a total of approximately 1,600 people who have lost or left their positions with the company since 2020.
The company indicated the recent cost-cutting measures would result in non-cash charges totalling between $250 million and $300 million in the fourth quarter of 2022, mainly stemming from write-downs of excess inventory.
“These necessary changes are being implemented to ensure the size and scale of our operations reflect current market realities and will support the long-term sustainability of our company,” Klein said.
In addition, Canopy expects to incur between $100 and $250 million in non-cash impairment charges, driven by goodwill and intangible asset impairments.
Canopy is also looking to lower per-gram cultivation costs through increased cultivation-related efficiencies and facility improvements, as well as introducing a flexible manufacturing platform that will utilize contract manufacturing for certain product formats.
The company will also aim to align selling, general and administrative costs with short-term business expectations by reducing third-party professional fees and office expenses.
“The savings and operational efficiencies generated through these additional steps reinforce our commitment to driving Canopy to profitability,” Judy Hong, Canopy Growth CFO, said in a statement.
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“Achieving profitability in our Canadian business is critical to the success of our company and will ensure we can continue investing in our key strategic growth areas including US THC to build significant long-term value.”
The layoffs follow previous cost-saving measures worth $150 million to $200 million, Canopy said, of which the majority have already been achieved.
Late last year, Canopy announced the closure of one of its flagship cultivation facilities, a 23-acre property located in Niagara-on-the-Lake, Ontario, which resulted in dozens of job losses.
Canopy stock was down 1 per cent Wednesday to $6.75 on the Toronto Stock Exchange.