Aphria's management sprang to the defence during a conference call this morning. "While we factored in some impact to our business from the pandemic in Q3, the duration and the magnitude was greater than we initially anticipated," said Mr. Simon. Chief financial officer Carl Merton added that Ontario was in lockdown nearly every day of the quarter and Western Canada saw shutdowns too. As well, provincial cannabis boards -- which were previously predicting a boost in sales -- ended up reducing inventories, which led to Aphria receiving $5-million in product returns. Mr. Merton said Aphria was able to "mitigate a portion of the product return by finding alternate distribution channels." Yet nothing could stem the red ink. Aphria posted a loss of $360.9-million for the third quarter, sharply worse than its loss of $120.5-million in the second quarter.
Understandably keen to redirect investors' attention, Aphria repeatedly brought up what it saw as one of the highlights of the quarter, namely its all-share merger proposal with Tilray Inc. (U.TLRY) (which was dragged into Aphria's financial muck today and saw its stock drop $2.57 (U.S.) to $17.19 (U.S.)). Mr. Simon will be in charge of the combined company, which he hyped today as "one of the strongest global cannabis and consumer packaged goods companies in the world." Both Aphria and Tilray will hold shareholder votes on the merger this Wednesday. They are aiming to close the deal by (of course) April 20.
The S&P/TSX Cannabis Index lost 19.18 to 211.42, while the CSE Composite Index lost 13.77 to 852.51. Helping to drag the sector into the red was Aphria Inc. (APHA), which lost $2.89 to $17.47 on 10.9 million shares, after releasing its financial results for the fiscal third quarter ended Feb. 18. Chief executive officer Irwin Simon set the tone of the press release right away. Before even a single number was announced, Mr. Simon bemoaned COVID-19-related challenges that were "greater than we initially anticipated." In other words, brace yourselves.
For the fiscal third quarter, Aphria's net revenue came to $153.6-million and its adjusted EBITDA was $12.6-million. Both figures were below analysts' predictions of $163-million and $14.9-million. They were also below the comparative figures of $160.5-million and $12.9-million for the fiscal second quarter. COVID-19 lockdowns in Ontario and other core markets for Aphria meant that investors and analysts were not expecting much of a quarter-over-quarter increase, but the outright decrease was worrisome. Notably, gross revenue for recreational sales took a 17-per-cent plunge to $59.6-million in the third quarter from $72.1-million in the second quarter, breaking what had been a seven-quarter-long streak of increases.
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