Jun 8, 2022
Neptune to sell cannabis business, citing lack of profitability
Betting against pot, as companies overspent on production: Strategist
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Another Canadian-based cannabis producer is getting out of the legal pot industry.
Neptune Wellness Solutions Inc. said in a statement on Wednesday that it plans to divest its cannabis production facility and the two brands that it owns, a move that should result in laying off half of the company’s workforce. The company cited the need to improve its pathway toward profitability and reduce costs as reasons behind its decision to divest its cannabis assets.
Neptune is the latest company to withdraw from the Canadian recreational cannabis market following similar moves from other smaller players such as FSD Pharma Inc. and Harvest One Cannabis Inc., given the profitability challenges in the industry amidst steep competition and an onerous taxation regime.
Neptune said it has retained Stifel GMP to help sell its Sherbrooke, Que.-based production facility – which is valued at $21 million - as well as its Mood Ring and PanHash brands.
The company said it will redirect its efforts to its consumer products business, which focuses on organic baby and toddler foods and nutraceuticals.
“This strategic divestiture greatly simplifies our overall structure, enabling us to hyper-focus on those areas of the business we believe are best positioned for profitability and growth," said Michael Cammarata, president and chief executive officer of Neptune, in a statement.
As a result of Neptune’s decision to get out of cannabis, the company expects to generate estimated cost savings of $5.8 million per year.
Neptune generated $23.2 million in cannabis sales over the past 12 months, according to industry data tracker Hifyre, but was making just under $3 million in revenue a month. The company was ranked 24th in the country’s cannabis market by sales, Hifyre said.
MJBiz, an industry trade website, reported in October that Cammarata received $58 million in compensation in 2020 and a further $10.3 million in 2021 despite reporting net losses of $128.4 million and $107.7 million in those respective years. Neptune’s shares are down nearly 98 per cent from a peak of US$6.32 in Jun. 2019.
