Canopy Growth said Wednesday it will close two facilities, eliminate 500 positions, and cancel plans for another greenhouse, the cannabis company said Wednesday. Canopy stock was down 1% to $17.57 in aftermarket trading.
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Canopy (ticker: CGC) will shutter its greenhouses in Aldergrove and Delta, British Columbia. It called such sites "no longer essential to its cultivation footprint." Canopy is also no longer planning to open a third greenhouse in Niagara-on-the-Lake, Ontario.
CEO David Klein, who joined the company from controlling shareholder Constellation Brands (STZ) in January, said in the news release that he's committed to better aligning Canopy's resources with consumer needs.
"Today's decision moves us in this direction, and although the decision to close these facilities was not taken lightly, we know this is a necessary step to ensure that we maintain our leadership position for the long-term," Klein said.
Cash burn has been a serious concern for many Canadian marijuana growers. While Canopy's investment from Constellation Brands meant it was better capitalized than peers like Aurora Cannabis (ACB), it also put a magnifying glass on the grower's losses when they eventually dragged on Constellation's own earnings.
Canopy expects to record pretax charges of between approximately 700 million Canadian dollars (US$523 million) and C$800 million during its March quarter. Such charges reflect this announcement and additional changes related to its organizational and strategic review, the company said.
It added that the British Columbia greenhouses account for 3 million square feet of licensed production space, and were put into commission beginning in February 2018. The company cited slower-than-expected development of the Canadian recreational market that led to challenges in working capital and profitability in the pot trade.
Canopy also noted that Canada didn't allow outdoor growing until after it "made significant investments" in greenhouses. The company now has an outdoor site, which it called more cost-effective.