lscfa wrote:
Appears to be due to high raw material prices. Maybe do what Valens did to turn gross profit positive.
Medipharm MD&A:
"The Group continues to refine its production processes and methodologies, and sell through historically acquired higher priced raw materials, and expects to increase production efficiency and gross profit."
Valens Jan 19/21 NR:
After analyzing Canadian cannabis market trends, including: (1) the anticipated increase in outdoor cannabis volumes and continued overall decline in dried cannabis pricing, (2) the strong success of its value-priced product offerings with partners, and (3) the near-term launch of several new product formats which leverage both strain and terpene specific profiles, The Valens Company made the strategic decision to liquidate the majority of its cannabis oil inventories at market clearing prices in the fourth quarter of 2020. This decision led to a related one-time financial statement impact in the fourth quarter of 2020 between $9.0 million and $10.0 million , including a $2.9 million to $3.2 million loss from the sale of bulk cannabis oil, an inventory write-down of $4.7 million to $4.9 million , and a provision on previously entered biomass commitments of $1.4 million to $1.9 million .
The Valens Company has achieved two core objectives with the completion of this strategic initiative. First, the Company has reduced the average price of its oil inventory by over 50% and can now rebuild its inventory with targeted strains of dried cannabis sourced at opportunistic, lower price points that are anticipated to grow product gross margins in 2021. Second, Valens can now better align its catalogue of strains in inventory with its innovative product portfolio, as well as offer a broader range of products at consumer-friendly prices – an attractive advantage to existing and potential new partners, including large consumer packaged goods companies.
Tyler Robson , Chief Executive Officer and Chair of the Board, said, "Looking into 2021, we wanted to clear the deck and increase our flexibility to make a much more aggressive push into the market with new, innovative products, including several exciting opportunities in the Health & Wellness category, at highly competitive prices. Adding low-cost inputs to our already low-cost manufacturing infrastructure makes us tough to beat and will help us secure a cost leadership position in the market. While this decision resulted in a one-time financial statement impact in the quarter, we now enjoy the increased opportunity to capture market share, drive future product margin expansion and generate shareholder value as one of the most flexible, lowest-cost cannabis platforms in the Canadian market focused on 2.0 and 3.0 cannabis derivative products."