Tilray, Inc. (NASDAQ: TLRY) can be added to the growing list of Canadian cannabis companies who’ve been shutting down greenhouses across the country in 2020.
The Nanaimo, B.C.-based company said this week that its High Parks Gardens facility in Leamington, Ontario will close its doors over the course of the next six weeks in an effort to cut costs. The Windsor Star reports that 120 workers will lose their jobs due to the closure.
The greenhouse contains 406,000 square feet of Health Canada licensed cultivation space and was a key piece in Tilray’s $70 million acquisition deal with Natura Naturals Holdings in February 2019.
But with cannabis supply outstripping consumer demand, along with a slower-than-expected physical store rollout, industry players like Tilray are reducing production capacity in search of elusive profits.
Tilray said the closure will save it about $7.5 million annually, “and avoid significant ongoing capital expenditures” while the company turns to more third-party supply contracts to meet consumer demand.
CEO Brendan Kennedy said Tilray is constantly looking to increase efficiency “against a challenging industry backdrop” in an effort to satisfy its wary investors.
“The decision to close a facility is never easy but we are confident that this will immediately put Tilray in a better position to achieve our goals of driving revenues across our core businesses and working towards positive adjusted EBITDA by the end of 2020,” Kennedy said in a statement that also thanked its departing staff.
Canadian cannabis greenhouse closures continue
Tilray joins a group of producers — from small to large — who have abandoned major growing facilities this year.
In March, industry heavyweight Canopy Growth, Corp. (TSX: WEED) said it was terminating operations at two B.C. greenhouses, which accounted for 3 million square feet of licensed growing space and 500 jobs.
A few weeks later, The Green Organic Dutchman, Ltd. (TSX: TGOD) closed its Quebec-based facility reportedly laying off 30 people in the process.
Vancouver-based Zenabis Global, Inc. (TSX: ZENA) also said in March that it would cut 175 workers along with its facility in Delta, B.C., which is reportedly on sale for $12.75 million.
As bankruptcies accelerate in the industry, many smaller producers are expected to be selling off their assets.
True Leaf Brands, Inc. (CSE: MJ) filed for bankruptcy this month and said it was looking for a buyer of its 18,000 square foot production facility in a recent press release.
In its latest quarterly report, Tilray also said it has had to grapple with reducing its 1,443-member workforce by 10 per cent in February and with restructuring its operations.
The company, however, noted that it will keep its High Park cultivation and processing facilities open in Enniskillen and London, ON, as well as its operations at its home base in Nanaimo and overseas in Portugal.
Tilray did not disclose whether it would be looking to sell the Leamington greenhouse.
Since the company reported the closure on Tuesday, shares have fallen US$0.42 on the Nasdaq exchange, closing to US$10. 39 on Thursday.
Top image via High Park Gardens, a subsidiary of Tilray