Aurora Cannabis puts positive spin on $1.3 billion loss

But after announcing 500 layoffs last week, it’s difficult to see how the company will stay afloat without selling off parts of its operations

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Aurora Cannabis released its second-quarter results Thursday (February 13) a week after announcing 500 layoffs and a major corporate shakeup.

New executive chair and interim CEO Michael Singer tried to put a positive spin on the numbers. He noted that the company has “begun to implement a business transformation plan.” And that it intends “to manage the business with a high degree of fiscal discipline.”

Singer’s sentiments were echoed by CFO Glen Ibbott. He noted that “the transformational actions we announced last week have already positively impacted SG&A [Selling, General and Administrative] expense.”

That’s hard to square with the company reporting $1.3 billion in losses. Total revenues are also down 26 per cent. Total production took a similar hit.

For anyone who listened to their conference call with investors last week, the results are an enormous indictment.

Calling efforts to cut costs a “new focus” is laughable for a company that has spent a ton of money on bad business decisions. Among the biggest was opening growing facilities in Europe and South America where markets are years away from maturing.

Aurora proudly points out that is has a presence in 25 countries on five continents. They’ve stayed mostly out of the U.S. market. But it’s only in Canada that they can actively sell weed. And judging by the results, they don’t know how to do that very well. Yet, the stock-pumping sites are still advising people to buy into the company.

Is there even a new focus? On that front, the company plans to cut its way to growth and sell products that aren’t selling.

Aurora doesn’t seem to have figured out yet that the market for weed are people who smoke a lot of weed, not soccer moms, khaki-wearing dads and yuppie business types.

Aurora’s production costs (less than a dollar per gram) are lower than any of the big players in the business. That they still can’t wring a profit out of that says a lot.

The frustration for consumers is that many in the industry are treating Aurora’s problems as purely a symptom of over-regulation. Another reason offered by the company for its woes is the slow roll-out of retail shops in Ontario.

But there’s a far simpler explanation. Aurora seems to have spent all their money in the green rush before figuring out how to make it back.

Meanwhile, the company is entering what one spokesperson describes as a “quiet period,” while it figures out its next moves.

With a $360 million debt bill due in August 2021, it’s unlikely the company can stay afloat without selling off parts of its operations – if they aren’t bought out first.

 

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