Nextleaf Solutions Ltd C.OILS

Big Changes Happening in Canadian Cannabis

[LastoftheFranks]

SMITHS FALLS, ON, Dec. 9, 2020 /CNW/ - Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ: CGC) today announced a series of Canadian operational changes designed to streamline its operations and further improve margins.

Canopy Growth will cease operations at the following sites: St. John's, Newfoundland and Labrador; Fredericton, New Brunswick; Edmonton, Alberta; Bowmanville, Ontario; as well as its outdoor cannabis grow operations in Saskatchewan. Approximately 220 employees have been impacted as a result of these closures.

"As part of the end-to-end review of our operations that we outlined during our second-quarter earnings call, we have made the decision to close a number of our production facilities. These actions will be an important step towards achieving our targeted $150-$200MM of cost savings and accelerating our path to profitability. We are confident that our remaining sites will be able to produce the quantity and quality of cannabis required to meet current and future demand," said David Klein, CEO, Canopy Growth. "This was a difficult decision but I believe it is the right one. I want to thank all of the employees impacted by this decision for their efforts in helping build Canopy Growth."

These decisions are the partial outcome of an ongoing end-to-end review designed to improve the Company's margins. The end-to-end review was announced during the Company's Q2 earnings call and looks at people, process, technology, and infrastructure. The Company expects to record estimated total pre-tax charges of approximately $350-400MM in the third and fourth quarters of Fiscal 2021.

The production sites impacted represent approximately 17% of the Company's enclosed Canadian footprint and 100% of its Canadian outdoor production footprint.

All figures reported above with respect to the third and fourth quarters of Fiscal 2021 are preliminary and are unaudited and subject to change and adjustment as the Company prepares its quarterly and annual financial statements.

https://www.newswire.ca/news-releases/canopy-growth-announces-changes-to-canadian-operations-871327150.html

[Rm90090]

Franks, If I am reading this correctly - they have now ceased growing (in Canada at least). This looks as though they are specialising into: manufacturing, branding, and distribution of their products. This looks like a good thing for OILS as they will eventually need to purchase distillate for their 2.0 products. Unless they plan to specialise further, and use a prodcut manufacturing company

[Rm90090]

My mistake - it says in the release that they still have some production sites available.

[LastoftheFranks]

Canopy's 2 year etraction contract with Valens also expired at the start of December.  Saskatchewan Facility 2019: Canopy Growth recently retrofitted the now fully licensed KeyLeaf facility in Saskatchewan, a company with over 50 years of experience in the extraction industry. This facility is expected to be online in the Fall of 2019 and has the capacity to extract up to 5,000

[shneps]

So, Canopy is shutting down their outdoor grow operation that is located close to their extraction subsidary.  That doesn't look good for their extraction operations.

[LastoftheFranks]

Canopy was built vertically integrated and the new CEO's job is to disassemble the whole thing and operate like a brand and retailer.  If you operate an extractor you need sales to maintain the operations of the extractor profitably. If you're just trying to sell vapes and push your brand, you only need access to extraction services. This is how you cut costs. 

[Rm90090]

Agreed - I beleive CAnopy will be a large Cannabis CPG company at the end fo the day. However, right now there is alot of OIL in the market from the 2.0 leadup. It will take a little time for alot of this extra oil to be used. At that time, I think CAnopy and other large former LPs will need more OIL (cost effectively).

[LastoftheFranks]

OCS and other provincial retailers no longer accept products packaged older than 3months. Much like the flower glut, most of the excess oil will die in the warehouses it's sitting currently or magically appear on the illicit market.  This is the type of decentralization the market needs for widespread profitability to be attainable.

[stealthct]

Cannabis companies over the past two years for Christmas have basically said "Screw you retail investors, give me your PP money the following year". Expect a similar quote December 2021 as well. But long and strong Nextleaf Solutions

[DonRudy]

@lastofthefranks I'm having trouble finding info on the acceptance of products older than 3months. Can you provide a link if possible.  I was able to find this in regard on the OCS website. I may simply be looking in the wrong place   Do cannabis products have an expiry date? How do I know if my product is fresh?CLOSE Cannabis labels list the

[LastoftheFranks]

OCS currently does product calls every 3 months to maintain fresh inventory instead of long term supply deals. They got bombed with aging and moldy product when they first rolled out. They will return product to LP's if it does not move or is spoiled, at the LP's cost.  Go to their wholesale site. Product calls are becoming more frequent as store rollouts increase.  https

[DonRudy]

Thanks for pointing me in the right direction. 

[Rm90090]

This is good information to know thank you. Anyone have a guess for when we may see the oil supply glut start to lessen?

[LastoftheFranks]

"Oil Glut" is an imperfect descriptor. There is an oil glut in the same way there is glut of chip companies. Lots of companies rushed into making $80 vape catridges nobody wants. Distributors don't need 20 different "premium vapes" so they pick 5. 2 of those actually sell, the other 3 are returned to the LP's and logged as a writedown. That product is then "