Aurora Cannabis is undergoing a drastic restructuring phase

The cannabis company has reviewed “all business operations and concluded that certain assets and goodwill values as at Dec. 31, 2019 exceed current fair-market valuations.”

Bethan Rose Jenkins, Cannabis News Writer/Editorial

In January, shares of pot stock Aurora Cannabis Inc. sunk by 12.5 percent. This wasn’t the only thing that shook the Canadian cannabis company this year. On Thursday, February 6, a statement from Aurora announced that Chief Executive Terry Booth will be retiring from his role amid “sweeping changes” occurring for the cultivator.

Just one day after Aurora announced that Booth would be leaving the team, U.S.-listed shares of the company’s cannabis stock tumbled by more than 16 percent in premarket trade. Over the past 12 months, Aurora’s value has tumbled by a whopping 74 percent.

To make matters worse, the company’s preliminary second-quarter fiscal 2020 financial results were dampened by “current cannabis market conditions.” Aurora anticipates that it will pull in cannabis revenues ranging between CAD $62 million-$66 million “net of excise taxes” for the quarter; that’s equivalent to USD $46.5 million-$50 million. Unfortunately, this is less than the total net revenue of CAD $78.8 million predicted by analysts.

International ambitions have gone out of the window for the time being; before Aurora can expand beyond North America, the company must take time to recover. A recently introduced “business transformation plan” is touted to reduce capital spending and strengthen business operations moving forward.

Aurora’s “business transformation plan” involves employee lay-offs

Included in Aurora’s restructuring plan is the dismissal of approximately 500 full-time workers. This means that an estimated 17-18 percent of the Canadian cannabis producer’s workforce will be terminated from their roles; based on a September announcement that claimed Aurora had employed around 3,000 individuals on a full-time basis.

Due to the announcement of lower-than-anticipated sales figures and employee layoffs, Aurora is expected to give up on international expansion goals for 2020. Instead, the Canadian cannabis company will pay attention to “core areas” of interest, including Canada’s ever-growing consumer market; combining both medical and recreational. Nonetheless, the company has already made its mark on cannabis markets in Germany and South America.

Aurora recently announced that it has successfully obtained the required permits to resume sales of medical cannabis in Germany. Moreover, Aurora previously confirmed an agreement to export CBD (cannabidiol) products to Brazil and Mexico. In addition to this, the Canadian cannabis giant possesses licenses for medical cannabis production in Colombia.

“We believe that the long-term opportunity for Aurora remains very compelling, despite a slower-than-anticipated rate of industry growth in the near-term,” said Aurora Chief Financial Officer Glen Ibbott. “We also believe our approach to rationalizing the business and conservatively improving our balance sheet positions Aurora in a more stable position for sustainable growth going forward.”

Market volatility has negatively impacted the value of Aurora’s assets

Based on the update about Aurora’s “business transformation plan”, the cannabis company has reviewed “all business operations and concluded that certain assets and goodwill values as of Dec. 31, 2019, exceed current fair-market valuations.” Ibbot confirmed in a statement that the impaired assets are located in Denmark and South America.

“Core Canadian cannabis assets are not impacted by these non-cash asset impairment charges,” he reassured investors. According to an official statement from the company, per-quarter expenditure up until the end of fiscal fourth quarter 2020 will not exceed CAD $40-$45 million; equivalent to USD $30 million-$33 million.

Based on the company’s recent statement, “record provisions” for returns, price reductions and prospective provisions to the amount of CAD $12 million (USD $9 million) are to be expected. Furthermore, Aurora says that it will incur one-time charges – regarding the company’s reduced financial output – to the amount of CAD $2 million-$4 million (USD $1.5 million-$3 million.) This amount is likely to be incurred during the second and third fiscal quarters

“These combined changes are consistent with, and evidence of Aurora’s commitment to, achieving positive earnings before interest, tax, depreciation and amortization (EBITDA) and cash flow as rapidly as possible, while still maintaining the ability to capitalize on longer-term Canadian and global cannabis market opportunities,” the company said.

Aurora is one of many major cannabis companies experiencing financial woes as of late; dispensary chain MedMen is drowning in debt and recently lost its CEO Adam Bierman, in addition to laying off hundreds of employees.

A full financial report on Aurora’s full fiscal second quarter will be published today — February 13.