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Gatineau, Que. — Hexo Corp. reported a net loss of $11.1 million in its latest quarter, up from a year earlier, when it reported a loss of $690.3 million, which included $616 million in one-time impairment charges.
The Gatineau, Que.-based cannabis company’s net revenues for the second quarter of the company’s financial year were $24.2 million, down 54 per cent from a year earlier and down 32 per cent from the previous quarter.
Hexo attributed the year-over-year lower net revenues to decreased market share and performance in Ontario, Alberta and Quebec.
It attributed the decline in net revenues from the previous quarter to a variety of factors including Quebec competitors cutting prices and some products being placed on hold because of pricing reductions in Ontario.
President and CEO Charlie Bowman said while cannabis prices have dropped sharply across the market, it’s Hexo’s view that slashing prices isn’t a sustainable strategy.
Chief financial officer Julius Ivancsits said the company’s focus on achieving profitability is yielding solid results, noting that the company saw positive net income before tax for the first time in its history.
Hexo Corp.’s chief executive says he’s seen a “price war” take shape over the last five months that could cause “significant” damage to Canada’s cannabis industry.
Charlie Bowman says there are many smaller and independent pot retailers that are “bleeding” because of the higher number of rivals and their tendency to undercut one another.
He says the industry’s pricing troubles have been compounded by the illicit market, which Bowman noticed had “fantastic” growth this year, challenging licensed cannabis producers.
Bowman is hopeful the Ontario Cannabis Store’s plan to reduce its margin and markups later this year will help licensed producers chisel away at the illicit market.
The provincial pot distributor’s move is expected to put $35 million back in the hands of licensed pot companies this fiscal year and $60-million in the 2024 fiscal year.
By the OCS’s count, the illicit market made up 43 per cent of Ontario’s cannabis market last March.
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