TORONTO, Aug. 28, 2017 /CNW/ - Cronos Group Inc. (TSXV:MJN)
(OTC: PRMCF) ("Cronos" or the "Company") is pleased to report the financial results and accompanying management discussion and
analysis for the quarter ending June 30, 2017; copies are available on the Company's website
(www.thecronosgroup.com) and have been filed with
SEDAR (www.sedar.com).
In Q2, Cronos remained focused on executing against the Company's operational strategy, which resulted in a 25% increase in
sales quarter over quarter: $643k in Q2 vs $514k in Q1. Overall, the
quarter produced $174,879 in positive net income from operations with a realized $1.3M gain in net income from non-core investments.
Domestic sales contributed 77% to the topline in the quarter. During the period, the Company commanded a domestic average
selling price of $9.50 per gram, which reflected the improvement in product quality across both
Peace Naturals Project Inc. ("Peace") and In the Zone Produce Ltd. ("ITZ").
Cost of Goods Sold ("COGS") continued to decline to $2.18 per gram in Q2 following multiple
operational upgrades from Q1. Of the three existing production facilities at Peace, Building Two ("B2") was the only Peace
facility where product was harvested in the quarter. The other facilities were undergoing significant
upgrades. Management expects COGS to continue to decline with scale as the other two facilities ramp up production.
During the quarter, Company repaid a $4M mortgage to Romspen. Subsequently Romspen agreed
to provide a $40 million senior secured facility to Cronos on August
24 th that will fund ongoing expansion at Peace.
Additionally, during Q2, international sales grew by 27% quarter over quarter. Towards the end of Q2, demand in
Germany increased substantially following German Parliament's decision to implement health
insurance coverage for eligible patients. As a result, Cronos continues to see increased demand in Germany, which has led to a product shortage. As one of two Canadian companies currently supplying product
to this market, Cronos sees this as competitive advantage moving forward.
Operational Update:
Since acquiring Peace, Cronos management has implemented significant facility upgrades and process improvements. The Company
is now starting to realize the results of those efforts:
- Yields have dramatically improved, product offerings have increased, and metabolite profiles have gone up by as much as
44%.
- Margins have increased by reducing COGS and introducing more premium products.
- Exports to Germany have grown, and the Company will continue to strategically allocate
supply to establish international distribution channels.
- Completion of the first harvest in Building Three ("B3"), which is on track to be fully operational before the end of Q3.
Under our perpetual harvest methodology, capacity is expected to dramatically increase with each subsequent B3 harvest.
- Retrofitted Building One ("B1") at Peace with a two-tier rolling bench utilizing ITZ's hydroponic growing methodology and
an LED lighting system.
- Completed a state-of-the-art commercial oil production lab, which will be fully functional following final approval from
Health Canada in September. The laboratory will capitalize on efficiency upgrades to produce cannabis oils utilizing existing
extract-grade inventory.
- Secured $40M in non-dilutive, flexible mortgage financing to fund the expansion at
Peace.
- Construction of the 315,000-square foot expansion is progressing well and is on schedule.
- The 28,000-square foot greenhouse is expected to be operational in Q4.
- Weekly video updates of our construction progress are available on Twitter @CronosGroupMJN.
"It's been less than a year since Cronos acquired Peace and we're just beginning to see the results of the work we've put
in. I expect Q3 to be the most successful quarter in our company's history, and I have no doubt that that momentum will
continue into 2018 and beyond," says Mike Gorenstein, Cronos Group CEO.
About Cronos Group
Cronos Group, is a geographically diversified and vertically integrated cannabis company that operates two wholly-owned
Licensed Producers ("LPs") regulated within Health Canada's Access to Cannabis for Medical Purposes Regulations (the "ACMPR") and
holds a portfolio of minority investments in other Licensed Producers. The Company's flagship LPs, Peace Naturals Project Inc.
(Ontario), and In The Zone Produce Ltd. (British Columbia) are
collectively situated on over 125 acres of agricultural, licensed land. Cronos Group is focused on building an international
iconic brand portfolio, providing patients with compassionate and personalized care, and creating value for our shareholders.
Forward-looking statements
This news release may contain "forward-looking information" and "forward-looking statements" within the meaning of applicable
Canadian securities legislation. All information contained herein that is not clearly historical in nature may constitute
forward-looking information. Forward-looking statements are necessarily based upon a number of estimates and assumptions that,
while considered reasonable by management, are inherently subject to significant business, economic and competitive risks,
uncertainties and contingencies that may cause actual financial results, performance or achievements to be materially different
from the estimated future results, performance or achievements expressed or implied by those forward-looking statements and the
forward-looking statements are not guarantees of future performance. Except as required by law, Cronos Group disclaims any
obligation to update or revise any forward-looking statements. Readers are cautioned not to put undue reliance on these
forward-looking statements. This news release contains information obtained by Cronos Group from third parties. Cronos Group
believes such information to be accurate but has not independently verified such information.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For more information, please visit www.thecronosgroup.com.
SOURCE Cronos Group Inc.
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