NEWS FILE PHOTO
There is no news on the local Aurora facility following the stepping down of the company's CEO, 500 layoffs and further curbing of capital spending were announced Thursday.
cgallant@medicinehatnews.com@CollinGallant
Details are limited about what a new round of deep cost cutting by Aurora Cannabis will have on the commissioning of the Aurora Sun greenhouse in Medicine Hat.
The company that announced last fall that the 36-acre growing facility would only partially open this summer, again on Thursday said it was examining all capital projects with an eye to conserve cash and assuage financiers.
But, it’s not immediately clear if that includes further delay in the Hat, or, considering poor sales that led to this week’s announcements, whether any new production from Sun would be needed.
Calls for clarification went unreturned on Friday, while previously, officials said more details might be included in the company’s second-quarter financial update, which is now expected on Feb. 13.
Utility officials with the City of Medicine Hat, which has signed a major power supply contract with company when the project was announced in 2018, as well said they are waiting on further word.
City utility commissioner Brad Maynes described the situation as “fluid” but that he said the unit that is already producing healthy profits would not be hampered if new sales are delayed.
“Any operational change with a material industrial customer will affect our results,” he said. “However we remain diversified in our service delivery so the magnitude of effect is mitigated.”
The power plant produced profits in the $40-million range over the past two years with existing customers and an export program. The size of the power contract had also sent the city into planning mode to expand capacity by twinning the north-end power plant. That is not needed to meet current need or meet the Aurora load, officials stressed, but adds capacity either as emergency or to market.
Aurora officials said they are optimistic about the growth potential in the Canadian market but sales are slow, hampered by slow roll-out of retail outlet licences in some provinces and consumer activity.
“It doesn’t mean we don’t intend to grow, but we believe we have enough to supply the Canadian market for the foreseeable future,” said chief financial officer Glen Ibbott while speaking to financial analysts on a conference call Thursday night.,
Previous financial statements state the company produced 41,400 kilograms in the first financial quarter (which ended on Sept. 30.), but only sold 12,400 kilograms over the previous three months.
Projections at that time aimed to have a capacity to produce 150,000 kilograms per year by the end of the financial year this summer.
The full capacity of Aurora Sun is stated at 260,000 kilograms.
As of the fall, the company said it hoped to open in about 15 per cent of the space in Sun this summer, while other grow rooms could be added as demand warranted.
In November officials said the company had 20 capital projects underway, but had past the halfway point on spending on most of them.
Without specifically mentioning the future schedule of the Sun project this week, Aurora officials said capital spending would be under $100 million over the next six months.
“Over the past several weeks, Aurora management has undertaken a detailed evaluation of all capital projects underway and made decisions with respect to continuing or terminating further investment in each,” said interim CEO Michael Singer. “Future capital allocation decisions will be scrutinized first and foremost through a lens of optimizing near-term investor returns.”
On Thursday, immediate moves would involve lower spending to complete technology and off-shore projects notably in South America and Denmark.
The move is in response to a “very low growth” scenario in the Canadian cannabis market.
“We’re being very conservative, but the Canadian market is still there,” said Singer, adding that “significant near-term” capital reductions would “position Aurora for long-term profitability.”
