NEWS PHOTO COLLIN GALLANT The Aurora Sun construction site is pictured in the distance, beyond a sign denoting an area for cigarette smokers in the parking lot of the Canalta Centre in northwest Medicine Hat.
cgallant@medicinehatnews.com@CollinGallant
Aurora Cannabis provided no new details about its plan to complete the Aurora Sun greenhouse in Medicine Hat during a conference call to discuss financial results on Thursday morning.
Company officials who last fall announced a scaled-back commissioning schedule for the huge facility did however they say that a new clampdown on capital spending will be focused on “non-core” projects, such as subsidiaries and previously aggressive global expansion plans.
However, more budget cuts or a production slowdown could be needed by next fall to keep a promise to shareholders of profits by the end of the year.
“An important part of this is to reduce the complexity of our business and instill a culture of financial discipline across all of our operations,” said chief financial officer Glen Ibbot in response to questions about how the company could meet “aggressive targets.”
Later adding “there may be future opportunities to find further medium-term cost efficiencies … I have no doubt that we have the right team and the right time to execute against that opportunity.”
He later added, “The changes we made last week give us significantly closer to our target.”
Ibbot and interim CEO Michael Singer addressed institutional investors on a conference call for the second time in seven days.
Last week the company announced it was searching for a new CEO after former head Terry Booth stepped down, would lay off 500 employees across the company and constrain expansion projects to improve its balance sheet.
In November the company said it now planned to only open six growing rooms, totalling about 240,000 square feet at the 1.6 million square-foot Sun facility this summer.
Some local workers have told the News that still appears to be the plan, though the local office wasn’t spared from layoffs. One-quarter of the 40-person workforce was let go.
The new strategy is part of a plan to reverse losses in the face of flat revenue just one year after the recreational market became legal in Canada.
The company has for years said its strategy was to become a low-cost producer of high-quality product while becoming a large vertically integrated producer in the Canadian recreational and medical markets as well as internationally.
That led to dozens of side projects and stakes in other companies that were developing processing, marketing or retailing technology.
On Thursday, Aurora again touted its low-cost of production, but said demand was slow to develop. In response it would review partnerships and geographic markets, then allocate capital with near-term returns in mind.
“For various reasons and just in terms of building the company, the industry, and developing Aurora, we have a lot of complexity and a lot of non-core parts of the business that we’re looking at,” said Singer.
“How do we rationalize that and streamline this business and spend our time and focus on the core business? … There are upside opportunities here and we want to build a company with upside.”
Production gap
By the end of summer Aurora hopes to have an operating production volume at 150,000 kilograms per year. Aurora Sun would come online some time after that, operating in about one-fifth of the space that’s said to have an annual production capacity of 230,000 kilograms.
In the last two quarters, the company only sold about one-quarter of what it grew at Aurora Sky in Leduc and number other facilities.
Analysts asked how the company would manage the apparent gap between production and sales.
“It’s a critical question for us and the industry,” said IBB, who said the recently launched consumable market will come on stream soon.
“We had a view several years ago that the market would (take) everything we were producing, and in the short term that’s not necessarily true … Rest assured it’s something we’re paying to … we won’t allow that situation to persist.”
