Canopy Growth sees up to $800-million charge for global restructuring
Canopy Growth Corp. announced sweeping changes Thursday across its global operations aimed at cutting costs that will result in a charge of up to $800 million and a headcount reduction of 85 full-time positions.
Canopy said it will exit Africa, cease cultivation in Colombia, shut down its Saskatchewan production facility, and halt hemp cultivation in New York due to an oversupply of the product from last year's growing season.
"When I arrived at Canopy Growth in January, I committed to conducting a strategic review in order to lower our cost structure and reduce our cash burn," said David Klein, Canopy’s chief executive officer, in a statement.
"I believe the changes outlined [Thursday] are an important step in our continuing efforts to focus the company's priorities, and will result in a healthier, stronger organization that will continue to be an innovator and leader in this industry."
This is Canopy's second restructuring in as many months after the Smiths Falls, Ont.-based company said it would shut down two major cannabis production facilities in B.C. and lay off about 500 staff in an effort to restructure its operations to better address changing consumer demand in the Canadian pot sector.
RBC Capital Markets analyst Douglas Miehm said in a report Thursday that Canopy's latest restructuring announcement should help the company "narrow its strategic and operating focus, and the benefit to gross margins and operating expenses should be well received by the market."
Canopy entered the African market after acquiring Lesotho-based Daddy Cann Lesotho PTY Ltd. in an all-stock deal valued at $28 million in May 2018 in a move aimed at building the continent's burgeoning medical cannabis sector. The company was also looking to take advantage of South Africa's developing medical cannabis legislation at the time, it said in a statement.
Canopy acquired Spectrum Cannabis Colombia S.A.S. two months after its African investment in an all-stock deal that was valued at US$96 million. The purchase included a 126-hectare farm in the southern part of the country and also served as a base to expand into Brazil and Chile's medical cannabis markets.
Canopy’s Yorkton, Sask. facility was tagged to be divested since August after the 18,000-square-foot site was deemed to no longer meet the company's need for national production capacity.
The facility was one of Canopy's smallest operations, with the ability to grow just 100 kilograms of cannabis annually, with additional capital needed to ramp up production to an estimated 1,200 kilograms a year.
Canopy's entry into New York was heralded by U.S. Senator Chuck Schumer in 2019 as a major economic shot in the arm when the company broke ground on its hemp industrial park.
Last year, Canopy said it planned to invest as much as US$150 million in New York in one of its first forays into the U.S. cannabis market. While the company has launched several CBD products in the U.S., its strategy came at a time where farmers planted too much hemp, creating a glut of biomass and a sharp decline in prices.