After Bumpy Months, Aphria First LP to Post Cannabis Profits, But Questions Linger – LPC

Aphria posts surprise cannabis profits thanks to purchase of Germany pharmaceutical distributor.Aphria Inc. announced cannabis profits of $15.8 million for Q4, making it the first licensed producer to post a profit. The company said that its revenues were helped by its purchase of Germany’s CC Pharma for $60 million earlier this year. The company is a pharmaceutical distributor – including medical cannabis – to 13,000 pharmacies in Europe. Revenues rose by 75 per cent over Q3, with CC Pharma accounting for $99.2 million in sales.

Interim CEO Irwin Simon lauded the company’s employees for the cannabis profits. “Our team’s solid execution across key areas of our business resulted in strong adult-use revenue growth and a profitable fourth quarter,” he said in a press release.

However, not everyone is convinced in the validity of Aphria’s cannabis profits. John Zamparo, an analyst at CIBC, lowered his price target because he expected Aphria to write off its acquisition of Nuuvera Inc. That didn’t happen.

“I’m not sure what that was about,” Simon said, addressing the CIBC report. “Our strategic priority over the last six months has been focusing on our Canadian operations here in Leamington.”

Is Aphria Bouncing Back? – LPC

Aphria’s cannabis profits come at an important time. In December 2018 short seller Gabriel Grego, an analyst with Quintessential Capital Management, released a scathing report on the company. Stocks plummeted as Grego called Aphria a “shell game”, though his motives as a short seller were called into question as well.

Aphria did end up writing down $50 million on its Latin American investments after an Ontario Securities Commission review. CEO Vic Neufeld stepped down in the wake of the affair. Could Nuuvera revive those same concerns from analysts and stockholders?

On the flip side, the Leamington, Ont.-based company exceeded expectations in the amount of cannabis sold in Canada. It almost doubled, from 2,636 kilograms of cannabis in Q3 to 5,574 in Q4. Revenues rose from $15.4 million to $28.6 million. Aphria is also expected to be one of the leaders in cannabis vape pens when they are legalized later in 2019.

Even if cannabis profits are a clear sign, there is also the question of a permanent CEO for the company. Simon didn’t provide a timeline, or whether he was interested himself.

“My focus was getting the company back on track, and as you can see, all our hard work is paying off,” he said.

Aphria stock closed at $6.09 on August 1. As of posting time of this article, markets had not opened on August 2. Stockholders’ reaction to Aphria’s cannabis profits and any perceived outstanding issues remain to be seen.

This editorial content from the LPC News Editor is meant to provide analysis, insight, and perspective on current news articles. To read the source article this commentary is based upon, please click on the link below.

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