8 Aug

Cronos Group Rises on Impressive Q2 Sales

WRITTEN BY Rajiv Nanjapla

Cronos Group (CRON) reported its second-quarter earnings results today. For the quarter, the company reported revenue of 10.24 million Canadian dollars. Its revenue outperformed analysts’ estimate of 7.40 million Canadian dollars by over 38%.

This impressive sales performance appears to have increased investors’ confidence. The company was up over 5% in today’s early morning trading.

Cronos Group Rises on Impressive Q2 Sales

Cronos’s revenue growth

Cronos Group’s revenue rose 201.6% YoY (year-over-year) from 3.39 Canadian dollars in the second quarter of 2018. The legalization of recreational cannabis drove the company’s revenue. Its revenue rose 58.2% sequentially due to higher sales of CBD (cannabidiol) oil and dry flowers. CBD oil sales formed 20% of the company’s total sales in the second quarter.

In the quarter, the company sold 1,584 kilograms of cannabis, a YoY increase of 232.1%. The increase in the company’s production and the legalization of recreational cannabis drove its sales. Compared to the first quarter, the company’s sales rose 42.6%.

Operating loss widens

Increased processing costs raised Cronos Group’s cost of sales before fair value adjustments to 3.01 Canadian dollars per gram. In comparison, the company’s cost of sales before fair value adjustments was 2.63 Canadian dollars in the second quarter of 2018 and 2.69 Canadian dollars in the first quarter of 2019.

The increased cost of sales widened Cronos’s operating loss in the quarter. It reported negative adjusted EBITDA of 17.8 million Canadian dollars. The company reported operating losses of 2.4 million Canadian dollars in the second quarter of 2018 and 8.95 million Canadian dollars in the first quarter of 2019.

Cronos Group has reported comprehensive income of 250.9 million Canadian dollars, which translates to 0.22 Canadian dollars per share. The revaluation of derivative liabilities, which contributed 263.9 million Canadian dollars, exaggerated the company’s comprehensive income. Analysts were expecting the company to report a net loss of 0.03 Canadian dollars per share.

Other major events

  • In May, Cronos Group signed a cannabis concentrate supply agreement with MediPharm Labs.
  • The company also established Cronos Device Labs, a global research and development center for vaporizer innovation, in May.
  • Cronos signed a manufacturing agreement with Heritage Cannabis Holdings in July.
  • On July 31, it closed on its previously announced acquisition of a GMP-compliant fermentation and manufacturing facility from Apotex Fermentation.

Cronos Group’s peer Aphria (APHA) reported impressive fiscal 2019 fourth-quarter earnings results on August 1. You can read our analysis in Aphria Stock Rises on Earnings Beat. Canopy Growth (WEED) (CGC) is set to report its fiscal 2020 first-quarter earnings results on August 14. You can read our earnings preview in What to Expect for Canopy Growth’s Earnings.

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