CannTrust eyes U.S. cannabis market for growth
CannTrust Holdings Inc. (TRST.TO) Chief Executive Officer Peter Aceto said the cannabis producer is in active talks to enter the U.S. with potential partners, describing a cross-border move as a “fundamental part of our strategy” as the company reported a first-quarter net profit in its domestic operations.
“We are actively pursuing discussions in the U.S. with potential partners and we see this as a fundamental part of our international growth strategy. We just have to figure out who and how and what the structure might be,” Aceto told BNN Bloomberg in a phone interview on Tuesday.
Shares of CannTrust surged in early Tuesday trading on the Toronto Stock Exchange, moving nearly nine per cent higher as of 10:27 a.m. ET.
Aceto declined to specify who those multiple partners may be, or whether the company will settle on an agreement this year, but he signalled that the company is likely to pursue an arrangement similar to how Canopy Growth Corp. made a US$3.4-billion deal for U.S. operator Acreage Holdings Inc. last month. Canopy purchased the right to acquire Acreage through an option agreement once it would be permissible to do so, as cannabis remains illegal in the U.S. on a federal level.
“We see the U.S. as one of the largest opportunities in the world and we want to leverage our competencies, our reputation, our ability to execute in the U.S., absolutely,” Aceto said. “I know other people have figured out different ways on how to do it but we need to be respectful of the rules and regulations in regard to our TSX listing and NYSE listing.”
Aceto’s comments exploring U.S. opportunities come months after CannTrust Chairman Eric Paul told Bloomberg News in October the Vaughan, Ont.-based company was in discussions with potential partners in the beverage, cosmetics and food industries. Paul said the company expected to announce a deal by the end of the year.
Aceto told BNN Bloomberg that he wasn’t aware of what discussions Paul was specifically referring to at the time, but that the best way for the company to grow globally is through partnerships. He added that the company is also being introduced to other firms by some banks such as Bank of America Merrill Lynch, Citigroup and Credit Suisse Securities, which were involved in its recent equity raise.
“How these things materialize, when these things materialize is difficult and CannTrust, and me personally, [are] not really interested in overstating or making promises that we’re not sure we’ll be able to deliver on,” Aceto said.
CannTrust reported revenue of $16.9 million in its fiscal first quarter earlier on Tuesday, an increase of 115 per cent from the same period a year ago, with two-thirds of its sales derived from its medical cannabis segment. Recreational cannabis sales fell in its first quarter to $5.48 million from the previous quarter when it made $6.52 million, a decline Aceto attributed to the company’s mandate on ensuring its medical patients wouldn’t have any supply issues for their cannabis.
The company sold 3,014 kilograms of dried cannabis and equivalents extracts in the first quarter, down from 3,407 kilograms in the prior quarter.
“We needed to make sure we had inventory for our medical patients so we wouldn’t let them down,” Aceto said.
CannTrust now has 68,000 medical patients, an increase of 70 per cent from the same quarter a year earlier. The company estimates it now has a 30 per cent share of that particular market.
The company also reported a net profit of $12.8 million in the quarter, or 12 cents a share, compared to a profit of $11.4 million, or 12 cents a share, in the same quarter last year. Analysts expected CannTrust to report a loss of four cents a share in the quarter, according to Bloomberg.
Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.