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Tuesday, Oct 15, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

Cannabis

SNDL targets $30M in cost savings through 2024 from Valens acquisition

Gross margin was $32.5 million, compared with $3.4 million a year ago

SNDL targets $30M in cost savings through 2024 from Valens acquisition
Photo by SNDL.

vLeading cannabis firm SNDL Inc. (NASDAQ: SNDL) says it expects to achieve more than $30 million in annual cost savings through 2024 from its acquisition of The Valens Company Inc.

On Monday, the company reported its financial results for the first quarter ended March 31 and provided updates on the integration of The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS), saying it expects to realize more than $30 million in annual cost savings through 2024 from the acquisition.

The Calgary-based cannabis company said it has already achieved more than $13 million in cost savings and identified an additional $5 million in cost reductions to be realized this year. That surpasses SNDL’s original $10 million target for cost savings from combining the two companies.

Most of the savings have come from reductions in selling, general and administrative costs, as well as public company expenses. The remainder will come from supply chain and cost of goods sold efficiencies, SNDL said. Asset sales are also expected to generate $9 million in proceeds.

Read more: SNDL yearly revenue skyrockets to $712.2M in 2022

Read more: SNDL acquires four Dutch Love stores for $7.8M

SNDL bought Valens in January for $133.1 million in an all-stock deal, creating what SNDL called “a low-cost vertically integrated Canadian company” with the potential to generate over $1 billion in annual pro forma revenue.

For the quarter ended March 31, SNDL reported revenue of $202.5 million, up from $17.6 million a year earlier. The increase was helped by contributions from Valens and the acquisition last year of liquor retailer Alcanna Inc.

The net loss was $36.1 million or five cents per share, compared with a loss of $38 million or eight cents per share a year ago.

Results for the quarter were impacted by the seasonal downturn in liquor retail sales and inventory and asset impairments of $10 million, SNDL said. It also spent $13.5 million to replenish liquor inventory, $2.7 million on severance and restructuring, and $17.5 million “to stabilize Valens.”

Gross margin was $32.5 million, compared with $3.4 million a year ago.

Liquor retail accounted for $115.9 million of revenue, while cannabis retail brought in $67.4 million and cannabis operations $19.1 million. SNDL’s liquor retail business owns and operates 170 stores across Alberta, most under the Wine and Beyond, Liquor Depot and Ace Liquor banners. Its cannabis retail business includes 92 Value Buds stores and 99 Spiritleaf franchise stores.

“We are pleased to report progress towards key milestones in all of our operative segments against the backdrop of expected seasonally moderate sales in our retail networks,” said Zach George, SNDL’s chief executive officer.

“The integration of Valens is proceeding with pace, and we are actively identifying new revenue streams and cost reduction opportunities,” George said. “We expect additional restructuring charges to impact the second quarter and the results of our team’s hard work to become clear in late 2023.”

SNDL stock went up by a slight 0.3 per cent on Monday to $1.70 on the Nasdaq exchange.

 

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Natalia@mugglehead.com

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