Moncton-based cannabis producer Organigram’s announced its highest-ever gross profit margin in the first quarter of fiscal 2023. The company says it brought in $13 million by growing larger, more efficient, and producing less expensive harvests.
Organigram has the biggest share of the cannabis market in the Maritimes and is growing its presence in Quebec and Ontario. CEO Beena Goldenberg said the growth is driven by more sales in the company’s portfolio of cannabis and cannabis products.
“The first quarter of fiscal 2023 reflected the results of our efforts in fiscal 2022 to enhance scale and efficiency through facility expansion and productivity improvements,” Goldenberg said during the company’s January 12 earnings call.
This resulted in Organigram harvesting 22,000 kilograms of flower during Q1 of fiscal 2023, versus 12,000 in the same quarter of fiscal 2022.
Selling, general, and administrative (SG&A) expenses for Q1 of fiscal 2023 totalled $15.7 million, up from $12.6 million in the same quarter of the previous year, and increased to support business growth.
As a percentage of net revenue, SG&A decreased from 42 to 36 per cent.
“This foundation of increased capacity, high-quality, efficient production and innovation serves us well in addressing markets in Canada and internationally,” Goldenberg said.
Goldenberg told investors that the previous fiscal year’s expansion boosted Organigram’s annual capacity to 85,000 kilograms at its Moncton facility and reduced the cost of cultivation. That meant a record harvest in the first quarter of fiscal 2023.
She noted that in Q1, Organigram achieved a yield of 168 grams per plant – up 129 grams over the first quarter of fiscal 2022.
This efficient harvesting will continue, Goldenberg noted, as the company refines its cultivation technology.
“These initiatives had a positive, direct impact on our bottom line in the quarter, as well as a 43 per cent year-over-year increase in net revenue.
Finances
In the earnings call, Organigram CFO Derrick West said gross revenue in Q1 grew 37 per cent, to $60.9 million.
This is a jump of 43 per cent from the same period in fiscal 2022 and driven by sales and increasing recreational cannabis revenue.
Organigram’s gross margin was 30 per cent of net revenue, up from the 18 per cent it was in the same quarter of fiscal 2022.
“The transition to a positive net income is primarily due to a higher gross margin, along with the fair value gain in biological assets that occurred as a result of a large number of plants now growing in the Moncton facility,” West said.
Organigram reported $43.3 million in net revenue – a 43 per cent jump from the $30.4 million the company saw in the same quarter of fiscal 2022.
West said the sales for Q1 of fiscal 2023 totalled $32 million, compared to $20 million in the same quarter of the previous year – a jump of 13 per cent.
“The low increase in sales relative to the increase in revenues was due to the lower cost production that was achieved through higher output from expansion and improved yields,” West said.
West said the company had, on Nov 30, 2022, $95 million in cash and short-term investments, versus $99 million at the end of fiscal 2022.
“This small decrease is primarily the result of capital expenditures of $8.4 million, partially offset by the cash provided from operating activities,” he said.
The firm also reported a record adjusted gross margin of $12.8 million, or 30 per cent – that’s up from $5.5 million or 18 per cent the previous year.
Goldenberg said that Organigram maintained its number-three position among Canadian licensed producers, while earning a No. 1 market position for capsules, No. 2 ranking in the flower market, and No. 3 in the market for gummies and hash.
Goldenberg credited Organigram’s success to strategic investment, in fiscal 2022 that helped improve its margins, and several new products and brands, including infused pre-rolled products and its recently-launched Holy Mountain line of flower.
“Shred remains a solid and well-recognized brand embraced by cannabis consumers,” Goldenberg said.
She said she anticipates future gains, given Organigram’s strong sales, brand revitalization and plant science.
Sam Macdonald is a reporter with Huddle, an Acadia Broadcasting content partner.
