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Canopy Growth Corp. said early Thursday it was halting a range of operations across three continents and expects its restructuring plans to result in a charge of up to C$800 million (567.9 million) in the fiscal fourth quarter.
U.S.-traded shares CGC, -2.71% WEED, -2.87% of the cannabis company fell 1.9% in afternoon trading.
Canopy said it was selling operations in Africa, curtailing cultivation of hemp in the U.S. and Columbia, and shutting down an indoor production facility in Canada. The announcement will result in 85 job cuts, the company said.
“When I arrived at Canopy Growth in January, I committed to conducting a strategic review in order to lower our cost structure and reduce our cash burn,” Canopy Chief Executive David Klein said in a statement.
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Canopy’s restructuring announcement was expected by investors, Cowen analyst Vivien Azer wrote in a note to clients Thursday. Azer rates Canopy the equivalent of a buy, which she writes is the only such rating among Canadian weed stocks.
“We believe that Klein has strong insights into where to trim excess fat in the organization given his time on Canopy’s board of directors and as chairman, having already proven in prior roles to be a seasoned executive, and that he is well equipped to take this kind of dramatic / decisive action,” Azer wrote.
Azer also said in the note that Canopy has not yet disclosed either the projected cost savings for its restructuring plans or its updated cultivation capacity.
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In the U.S., Canopy said that it had halted operations at a hemp grow site in Springfield, New York because the market was flooded during the 2019 growing season and that it would use the supply to produce cannabidiol, or CBD, products. The company had previously said it would invest between $100 million to $150 million in its New York operations.
For Canada, Canopy’s home country, the company said that it was closing its indoor facility in Yorkton, Saskatchewan. The company had previously shut down production facilities in British Columbia and cut 500 jobs as part of the restructuring.
Turning to Africa, Canopy said it had entered into an agreement to sell its operations in Africa and Lesotho.
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Canopy first said it expected a fiscal fourth-quarter charge of C$700 million to C$800 million in March and reiterated Thursday that it continued to expected a charge in that range. Earlier in March, Canopy also closed its corporate-owned weed stores due to the coronavirus outbreak.
The U.S.-listed shares have lost 40.4% over the past three months, while the Cannabis ETF THCX, -2.59% has dropped 43.1% and the S&P 500 index SPX, +0.09% has declined 16.6%.
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