The Green Organic Dutchman Holdings Ltd (TSX:TGOD) released its full-year results this past week as it is the latest Canadian cannabis company to reveal how it has performed since legalization. Previously, The Company hadn’t seen any sales during the year but during the past quarter, it has generated $1.9 million in sales. This was generated through its acquisition of HemPoland, which it purchased for $18.6 million. It closed the acquisition back in October.
Further down the income statement we see that operating expenses during the quarter tripled from a year ago. Not unlike what we’ve seen with other companies, general and administrative costs were up significantly, rising 500% year over year. Marketing expenses were also up more than 420% while depreciation soared by over 330%.
In total, TGOD incurred an operating loss of $45 million for the full year compared to a loss of $15 million a year ago. This past quarter was responsible for a lot of the red with The Company incurring $19 million in operating losses during just the past three months. Like others in the industry, TGOD blames the loss “as a result of ramping up operations, numerous consumer research activities, and administration in preparation for commercial production in 2019.”
In addition to the Canadian market, TGOD has been continuing to build on its international presence, highlighting agreements in Jamaica, Denmark, Mexico and other countries around the world.
Overall, The Company’s management has been very excited with how well it has done in the past year, noting that:
– Brian Athaide, CEO
With a planned capacity of over 200,000 kg, there’s certainly a lot of potential for TGOD in an industry that is badly lacking the necessary supply to meet growing demand. However, it’s going to take some time as its key facility in Quebec is not expected to be completed until towards the end of 2019. Its facility in Hamilton, which has a production capacity of 17,500 kg, is expected to be completed by June of this year.
Key Takeaways for Investors
While the CEO was certainly excited by the results, investors should still temper their expectations a little. Until we see some sales come in from Canada, it’ll be hard to evaluate TGOD’s success relative to its peers. Although it was a big year for The Company, there was nothing in the financials that was terribly exciting, certainly not seeing expenses soar during the quarter.
And although The Company may tout its strong cash position at the end of the year, it wasn’t without a cost to shareholders. During the year, TGOD burned through $45 million to fund its operations and another $118 million for its investing activities. Since the beginning of the year, the number of shares outstanding more than doubled, from 60 million to more than 142 million. This is the key reason behind TGOD growing its cash as it hasn’t been generating any from its operations. And this has a dilutive impact on shareholders.
TGOD’s stock has doubled already in 2019 but over the past 12 months is up just 29%.