Canopy Growth announced the closure of two Canadian greenhouses last week.
The company plans to close its facilities in Aldergrove and Delta, British Columbia, resulting in the elimination of approximately 500 positions. Plans to bring a third greenhouse online in Niagara-on-the-Lake, Ontario have been scrapped.
Canopy Growth says these actions are part of the company’s efforts to align supply and demand while improving production efficiencies.
The greenhouses in B.C. account for approximately 3 million square feet of licensed production space and were put into commission, beginning in February 2018, after a period of phased retrofitting to help Canopy Growth scale up to supply the new Canadian adult-use market.
Nearly 17 months after the creation of the legal adult-use market, Canopy Growth says the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry. Additionally, federal regulations permitting outdoor cultivation were introduced after the company made significant investments in greenhouse production. The company now operates an outdoor production site to allow for more cost-effective cultivation, which will play an important role in meeting demand on certain products that rely on cannabis extracts.
“When I joined Canopy Growth earlier this year, I committed to focusing the business and aligning its resources to meet the needs of our consumers,” shared Canopy Growth CEO, David Klein. “… 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. Along with the rest of the management team, I want to sincerely thank the members of the team affected by this decision for their work and commitment to building Canopy Growth.”
Along with this announcement, the Company expects, based upon information currently available to management, to record estimated pre-tax charges of approximately $700-800MM in the quarter ending March 31, 2020.
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