(Bloomberg) -- Aphria Inc. shares fell 12 percent in pre-market trading in New York after the cannabis company wrote down the value of its controversial Latin American assets, reported quarterly revenue that missed estimates and announced Green Growth Brands Inc. has dropped its hostile bid for the company.

Earnings Insights

  • Aphria conducted an impairment test on its Latin American assets, the subject of a December attack by short sellers, and determined that a C$50 million ($38 million) non-cash charge was required due to lower gross margins, lower Ebitda margins and higher-than-expected expenses
  • The company reported fiscal third-quarter net revenue of C$73.6 million, missing the average analyst estimate of C$83.5 million. Its net loss was C$108.2 million or 43 cents a share
  • Adjusted gross margin was 18 percent compared with 47 percent in the prior quarter due to an increase in revenue from the lower-margin distribution business
  • Sold 2,637 kilogram equivalents, down from 3,409 a year earlier. The decrease was related to supply shortages as Aphria transitioned growing methods in the late fall and early winter, as well as temporary packaging and distribution challenges, the company said
  • Cash cost to produce dried cannabis was C$1.48 per gram, up from C$1.34 a year earlier
  • Average retail selling price of recreational pot before excise tax fell to C$5.14 from C$6.32 in the prior quarter due to a shift to smaller package sizes, while average selling price of medical pot before excise tax increased to C$8.03 from C$7.51
  • Appointed two independent directors, former Whole Foods executive Walter Robb and David Hopkinson, global head of partnerships at Real Madrid Club de Futbol

Hostile Bid

  • Green Growth Brands Inc. is bringing its hostile takeover offer for Aphria “to an end on good terms,” shortening the offer’s expiry date to April 25 from May 9, Green Growth CEO Peter Horvath said in a statement
  • The companies have agreed to a 12-month standstill period and will discuss a potential commercial arrangement
  • As part of a complicated financial arrangement, Green Growth has also agreed to repurchase 27.3 million common shares held by GA Opportunities Corp., its second-largest shareholder, for C$3.26 per share, below Friday’s closing price of C$3.86. It also expects to sell its 3 million shares of Aphria, Horvath said

To contact the reporter on this story: Kristine Owram in Toronto at kowram@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, David Scanlan, Courtney Dentch

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