{"id":234179,"date":"2019-10-11T03:24:20","date_gmt":"2019-10-11T07:24:20","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=234179"},"modified":"2019-10-11T03:24:20","modified_gmt":"2019-10-11T07:24:20","slug":"cannabis-company-hexo-corp-s-shares-plunge-after-it-lowers-q4-revenue-forecast","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2019\/10\/11\/cannabis-company-hexo-corp-s-shares-plunge-after-it-lowers-q4-revenue-forecast\/","title":{"rendered":"Cannabis company Hexo Corp.’s shares plunge after it lowers Q4 revenue forecast"},"content":{"rendered":"
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Earlier Thursday, the Gatineau, Que.-based pot producer issued preliminary guidance for its fourth quarter, which ended July 31, that its net revenue is expected to be about $14.5 million to $16.5 million. That’s a steep cut from the roughly $26 million in fourth-quarter net revenues it had signalled previously. (Pixabay photo)<\/figcaption><\/figure>\n

Shares of Hexo Corp. plunged after the cannabis company said its fourth-quarter net revenues will fall below its expectations by roughly 40 per cent and it withdrew its guidance for the 2020 financial year.<\/p>\n

Hexo’s stock slipped nearly 23 per cent or $1.12 to close at $3.76 on the Toronto Stock Exchange Thursday from its previous close of $4.88. It reached a low of $3.60 in earlier trading Thursday.<\/p>\n

Earlier Thursday, the Gatineau, Que.-based pot producer issued preliminary guidance for its fourth quarter, which ended July 31, that its net revenue is expected to be about $14.5 million to $16.5 million. That’s a steep cut from the roughly $26 million in fourth-quarter net revenues it had signalled previously.<\/p>\n

\u201cFourth quarter revenue is below our expectation and guidance, primarily due to lower than expected product sell through,\u201d said Hexo chief executive Sebastien St-Louis in a statement.<\/p>\n

\u201cWhile we are disappointed with these results, we are making significant changes to our sales and operations strategy to drive future results.\u201d<\/p>\n

St-Louis also said that over the past quarter, Hexo began \u201cre-configuring our operations\u201d to focus on high-selling strains and initiated a new sales strategy.<\/p>\n

In June, the company said it expected the fourth quarter to approximately double its third-quarter net revenues, which were $13 million, as it began realizing sales from the first harvests of its B9 greenhouse.<\/p>\n

Hexo on Thursday cited slower than expected store rollouts, a delay in government approval for cannabis derivative products and early signs of pricing pressure as reasons for its decision.<\/p>\n

\u201cThe delay in retail store openings in our major markets has meant that the access to a majority of the target customers has been limited,\u201d St-Louis said.<\/p>\n

Based on preliminary financial information and subject to year-end closing adjustments, Hexo said it now expects net revenue for its full financial year to be approximately $46.5 million to $48.5 million.<\/p>\n

Hexo also said it was withdrawing its previously issued outlook for its 2020 financial year. In June, Hexo had issued guidance of up to $400 million in net revenue in its 2020 financial year.<\/p>\n

\u201cWithdrawing our outlook for fiscal year 2020 has been a difficult decision,\u201d added St-Louis. \u201cHowever, given the uncertainties in the marketplace, we have determined that it is the appropriate course of action. We are also placing a greater focus on profitability.\u201d<\/p>\n

RBC Capital Markets analyst Douglas Miehm said Hexo’s updated fourth-quarter expectations \u201cwill catch much of the Street off guard, especially since the company started shipping products to provinces outside of Quebec during the quarter.\u201d<\/p>\n

Miehm said he was less surprised about the company’s withdrawal of its 2020 forecast of $400 million, as market expectations were too high. He said RBC Capital Markets’ net revenues estimate for Hexo’s fiscal 2020 is $250 million, but noted that there is \u201csignificant risk\u201d to Hexo’s ability to meet that mark as well.<\/p>\n

\u201cWe also contend that this provides a readthrough for other LPs (licensed producers), which … could face challenging growth prospects in the months ahead,\u201d Miehm said in a note to clients.<\/p>\n

Last week, Hexo chief financial officer Michael Monahan resigned for family reasons after taking the role in May.<\/p>\n

Hexo will release its full financial results on Oct. 24.<\/p>\n

This report by The Canadian Press was first published Oct. 10, 2019.<\/p>\n","protected":false},"excerpt":{"rendered":"

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