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 24th 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.