Conference Call recap. Copied from another board so I can not take the credit .
Intro By Vic
- The CC announcer incorrectly pronounced "APHRIA". (LOL)
- Carl addresses Altria rumor, re-stating the verbiage expressed in the press release regarding that there is no agreement in place, and at time the company has talks with many other companies on partnerships.
- No more further questions regarding this rumor.
- Key Highlights - Significant increase in grams sold, and strong top-line growth.
- Investment portfolio is performing exceptionally well.
- Strategic decision to exit LHS to focus on other "strategic opportunities"
- Nonetheless, Aphria intends to be a significant player in the USA, at the appropriate time in the future
- Timelines still on track, first sale now stated by Vic as January, or February, depending on Health Canada timelines on approvals.
- ALL available product is committed to provinces (aka sold)
- Actively working on value-added products for edible and beverages and the technology behind them.
International
- GMP certification for Avanti still underway
- November 5th Tender documents for Germany is due, and application is well underway
- Pursuing CBD strategy in Europe
- Tetra Bio Pharma moving to Phase 3 with Aphrias products, as well as a head-to-head trial with Fentanyl.
- These early investments do not pay immediate dividends for Aphria, but these long term investments will bear fruit when drugs are approved.
Aphria One
- 200 construction workers on site daily .
- Construction is done. Awaiting inspections from Health Canada
Double Diamond
- Construction Finished by end of October.
- Suffered a 2 month delay due to infrastructure issues with the Ministry of Transportation.
- They feel they have moved past this issue and are still on track with the timeline provided for first sale in Jan 2019, subject to Health Canada Approval
- Extraction Center also delayed 2 months, same issue with Ministry of Transportation, now on schedule to be open May 2018.
Current Operations
- Increased costs in quarter (forewarned last CC) due to staffing and growing pains of scaling up. Nothing new here.
- All-in costs increased from $1.60 to $1.83, as expected and forewarned last quarter.
- In anticipation of Phase 4 completion, there was a lower production volume due to space allocated for mothering plants.
- 22cents increase in costs due to lower yields in the greenhouse, and automation not being fully operational in the quarter.
- Phase 4 and Phase 5 expected to be fully operational end of 2Q19.
- Automation expected to be FULLY OPERATION END OF 2Q19
- Lower staff levels led to 1 week of harvest getting scrapped.
- Company chose to dispose of plants to ensure next weeks harvest was optimal conditions. $900k lost in product.
- Adjusted EBITDA loss $4 million. Consistent with last quarters forewarning. $3 million was due to Aphria International.
- Invested heavily in bench strength for adult use and international.
- $314 million in cash and marketable securities - Portion of this is allocated towards finalizing facilities, and staffing to prepare for 255,000 kgs rotation.
Question/Answers ( Just Answers)
- Plan to move plants into Part 4 or Part 5 is dependent on Health Canada approval. Request has already been submitted 2 weeks ago. Vic expects 2 more weeks for finalizing. Then final submission to Health Canada for approval. A LOT of companies are jockeying for position to get Health Canada to approve. Currently backed up.
- Soft gel approval is still waiting on approval from Health Canada. They are playing the waiting game. They have a pent-up demand for soft gels on medical as well as adult-use, but currently their hands are tied.
- The decision to destroy the plants was conscious and for operational efficiency .
- The UK is one of the top countries that they haven't secured a license yet. They are in deep dialogue with a number of influencers in the UK, and have met with decision makers to discuss moving into the country. Very important part of the Aphria story, and they do have relationships and are working towards agreements to be one of first 3 entries using the Rideau oil (great news).
- Quebec is best positioned as province in preparation for Oct 17. Other provinces that are doing privatization has its struggles currently. There are shortages nation-wide, which Aphria has conveyed for several months, and there are supply chain issues with every LP. This is just a short-term effect, as the shortage window for Aphria is 2-3 months, and then they will be in an enviable position to fill in any gaps when other LPs fail.
- European CBD strategy - Portugal and Italy for CBD "light" = hemp based. Other countries CBD focus that is cannabis based. Currently addressing which countries are better for each. (Continuously mentions Portugal)
- Germany tender is expected end of 1Q19 calendar year. Applications submitted November 5th (no new information here). They feel VERY confident that they will be in the race with the bench strength and team they have in Germany. The application is the exact same, with the same scoring system as the previous tender.
- Introduction of automation will address the issue they just faced with plants being harvest ready and not enough employees. Should be a non factor moving forward.
- Vic expect mass sell-outs of product in the first month. Craft growers are now going to have an opportunity to come to the table even if they don't have MOUs because LP's are not meeting their agreements.
- 2019 Latam Market
- Brazil option is still evolving, Government is not clear on exports. Would not expect any revenues in Full year 2019 from Brazil.
- Jamaica - Modest level of revenue in upcoming months, first part of the acquisition to have repeatable sales, albeit small. Currently in harvest mode.
- Colombia - crown jewel of acquisition. Facility build-out is underway. Looking to export from Canada to Colombia during the short term. Will see revenues from Colombia in Calendar Year 2019.
- Argentina - 6,000 bottles of Rideau oil. (No other update on ABP or the Joint Venture for Ministry of Health)
11 - Can not disclose quantities of sold product in September until the dust settles, however, Aphria is shipping and selling EVERYTHING their growing. Needs more data to understand how to shape their supply chain, based on what products are moving, and where in Canada they are moving fastest.
12 - Incentive pay for employees to come on weekends. 50 volunteers to work on weekends. Have to pay the premium in the short term in order to get up to speed. 2Q19 wont be indicative of cost structures moving forward. It will be a one-off with higher expenses to get through this time.
13. Company is "entertaining some thoughts on up-listing". However, they will not address rumors. They ONLY put out information when there are facts. We will see a press release accordingly when information is ready.