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Organigram foresees big revenue opportunities with demand for new products

Organigram Holdings Inc. is anticipating that consumers seeking non-smokable cannabis will help to further boost its revenues that more than doubled to $25.2 million in the first quarter.

The company based in Moncton, N.B., says revenues were up from $12.4 million a year earlier.

Chief executive Greg Engel foresees tremendous opportunities ahead as demand for vapes, chocolates and powdered products accelerates in the coming months.

“The feedback we’re hearing from the retailers is that the consumer that’s coming in today, many of them are consumers who have not come into retail stores because they don’t want to look for a dried flower product in the past,” he said in an interview.

That should translate into new revenues as between 40 to 45 per cent of sales should come from these Rec 2.0 products, according to results in U.S. states.

The first vape pens were shipped as planned in December while premium cannabis-infused chocolates are to begin sales later in the quarter.

Sales of powdered products, to be added to a consumer’s beverage of choice, are expected in the second quarter.

Engel declined to provide specific dates for the launch of these products but said one large unnamed province has already tripled its order for cannabis-infused chocolates.

“There’s a tremendous amount of opportunities with 2.0 products. It’s going to expand the market dramatically.”

Revenues during the first quarter included $16.7 million of sales to the adult-use recreational market and about $9.5 million to medical markets, partly offset by a $1.1 million provision for product returns and price adjustments.

The provision related to two slow-selling products sold to the Ontario Cannabis Store — a lower THC dried flower and THC oils.

Organigram’s net loss was $863,000 or less than a cent per share, compared with a loss of $29.5 million or 19.5 cents per share in the prior year. That large loss was largely due to non-cash fair value changes to biological assets and inventories.

The cannabis producer was expected to lose $3.9 million or three cents per share on $19.6 million in revenues, according to financial markets data firm Refinitiv.

Engel said he’s pleased with the solid quarterly results and positive adjusted EBITDA, but wouldn’t say when it will become profitable.

“We’re at the point where it’s a marginal loss but it is in part because the market really has not grown and we expect that to shift.”

Organigram said last November that its net revenue in the quarter would be higher than the $16.3 million in the fourth quarter due to increased sales to provinces and higher wholesale revenue.

The company said the Canadian cannabis market is poised for growth with more retail store openings planned in Ontario and Quebec, two provinces that together account for more than 60 per cent of the country’s population.

In particular, Ontario is moving to open more retail stores with approvals to be issued in April at an initial rate of about 20 per month.

Quebec also plans to double the number of stores and Alberta’s network of 375 stores will continue to grow to meet consumer demand.

Legalization of edible and derivative products is also expected to significantly expand the legal market although Newfoundland & Labrador, Quebec and Alberta have announced delays or restrictions on the launch of vaporizable products.

That increased demand should allow the company to move fairly quickly to “reinvigorate” its expansion plans, Engel added.

This report by The Canadian Press was first published Jan. 14, 2020.

Companies in this story: (TSX:OGI)

Ross Marowits, The Canadian Press