Marijuana set outs grow in the Mother Room at the Canopy Growth Corp. facility in Smith Falls, Ontario, Canada, on Tuesday, Dec. 19, 2017.
Chris Roussakis | Bloomberg | Getty Spits
Canopy Growth Corp reported a smaller-than-expected loss in the third quarter on Friday, as the Canadian cannabis company boarded a tight lid on costs, and its share price surged 20%.
The company, whose operating costs fell 14% from the late quarter, and gross margin expanded, said it would take further steps to cut costs and streamline its business.
“The following demonstrated positive progression across several key areas, the pace of which was better than we had anticipated,” Jesse Pytlak, an analyst at Cormark Assurances, said by email. “While there still remains some very heavy lifting that the company emergencies to complete, in our view, these initial results are encouraging.”
Canopy shares surged 20.5% to C$31.24 in early commerce in Toronto, their biggest one-day gain since August 2018.
Canopy’s upbeat results also boosted other pot ancestors, with CannTrust, Aphria, Aurora Cannabis, and Cronos all posting gains. The Horizons Marijuana Life Sciences Marker ETF rose 7.1%.
More than a year after Canada legalized recreational weed, most producers have languished to turn profitable because of fewer-than-expected retail stores and oversupply issues, while a cash crunch threatens profuse companies’ survival.
To soothe jittery investors, pot producers including Aurora Cannabis, Hexo, and Tilray have told a range of cost-cutting measures. Last week, Aurora cut 500 jobs and Tilray about 140 jobs, or not far from 10% of its total workforce.
Last year, Canopy said its major shareholder Constellation Brands’ finance fountain-head David Klein would take the helm, months after the Corona beer maker expressed disappointment upward of Canopy’s heavy losses in 2018.
“Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have on the agenda c trick started to implement tighter cost controls across the organization,” Canopy Chief Financial Officer Mike Lee mean in a statement.
Excluding items, Canopy posted a loss of 35 Canadian cents per share in the quarter ended Dec. 31, smaller than the mediocre analyst estimate of 49 Canadian cents.
Its net revenue of C$123.8 million also beat estimates of C$105.1 million, according to IBES information from Refinitiv. Gross margin before fair-value adjustments widened to 34% from 26% a year ago.
Canopy declared its cash and cash equivalents were C$1.56 billion at Dec. 31, down from C$2.48 billion at March 31, 2019.