Aug 2, 2019

Aphria eyeing CannTrust assets, maintaining profits: Chairman

Many more profitable quarters to come at Aphria: Interim CEO Irwin Simon

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Reporter

The pot production scandal plaguing CannTrust Holdings Inc. (TRST.TO) has not been good for the industry as a whole and cannabis producers need to work hard to instill confidence among investors and consumers, according to the chairman and interim chief executive of Aphria Inc (APHA.TO).

“At the end of the day, Health Canada needs to go out and figure out what happened [at CannTrust],” said Irwin Simon in an interview with BNN Bloomberg Friday.

“From trust with investors and trust with consumers. We have to make sure consumers trust brands and the company. What happened at CannTrust wasn’t good for the industry and absolutely not good for CannTrust. Between Health Canada and the company, and the new CEO who I know, they’ll figure out what to do there.”

When asked if Aphria would consider acquiring CannTrust assets, Simon declined to specify the company’s interest, but noted that CannTrust has “some great assets” and he “always looks for great opportunities.”

Simon’s comments come after Aphria reported a surprise profit in its fiscal fourth-quarter results that helped push its shares to a one-month high Friday. Aphria earned $15.8 million in the quarter ended May 31 on revenue of $129 million; both figures were above analyst expectations.

MATTER OF TRUST

Simon said the improved quarterly figures were the result of several internal changes the company made since the beginning of the year after a short-seller’s report in 2018 alleged the company overspent for Latin American assets and its senior management was involved in insider self-dealing. Aphria also had to manage a $2.8-billion hostile takeover bid from Green Growth Brands Inc. which was abandoned in April after the two companies agreed to enter discussions for a potential commercial arrangement.

“A lot was going on at Aphria prior to this year in regards to a short report and hostile takeover,” Simon said. “It was about focusing on this business and getting the team to get the growth right, getting our process right, getting our shipments to the liquor control boards and the consumers who wanted our products.”

Simon added that Aphria improved its governance practices, a move he believes helped to regain the confidence of investors in the company.

“The board of directors at Aphria took action when they needed to and made the right changes. That’s what investors are going to be looking at,” he said.

Simon also said that while cannabis producers needed to invest in brands and building out greenhouses, the time has come for companies to stop burning capital and need to deliver profitable quarters for their shareholders.

“At the end of the day, it’s about profitability and shareholders want to see profitability,” Simon said. “It’s not just a black hole and spend, spend, spend.”