Village Farms International, Inc. (NASDAQ: VFF) (TSX: VFF) announced its financial results for the second quarter ended June 30, 2022. Total consolidated sales increased 18% year-over-year to $82.9 million from $70.4 million. This beat the Yahoo Finance average analyst estimate for revenues of $70 million.
Village Farms reported a consolidated net loss of $36.6 million or ($0.41) per share, which included $29.8 million of impairments to Balanced Health Botanicals’ goodwill and intangible assets, compared with ($4.5 million), or ($0.06) per share. The consolidated adjusted EBITDA was negative ($10.3 million) compared with a positive adjusted EBITDA of $1.5 million.
“The continued successful execution of our differentiated Canadian Cannabis strategy drove strong year-over-year and sequential sales growth, achieving a new record high for the second quarter, as well as our 15th consecutive quarter of positive EBITDA for that business,” said Michael DeGiglio, Chief Executive Officer, Village Farms. “Our Pure Sunfarms brand maintained its number one market share position in dried flower in Canada, while Rose LifeScience became a top-three licensed producer in Quebec, with an 8.5% market share**, in part driven by its Promenade brand in collaboration with Pure Sunfarms. Importantly, our planned investments in our commercial capabilities, including sales support and marketing, strain development and other innovation, new brands and geographical expansion over the past 18 months to drive both near- and long-term growth are beginning to yield their intended results. We are also seeing the benefits of the evolution of our strategy for non-branded, with larger, more regular sales to a smaller number of repeat customers, which has been complemented by steady growth in exports, having recently completed our sixth shipment to Australia.”
Revenues for Canadian cannabis were $29 million, while revenues for U.S. cannabis were $5.7 million. Total cannabis segment net sales increased 44% year-over-year to $35.6 million, representing 43% of total Village Farms sales
Produce continues to deliver sizable revenue for Village Farms. Sales increased 4% to $47.2 million (more than cannabis) and adjusted EBITDA was negative ($10.3 million), compared with ($4.0 million), with the magnitude of the adjusted EBITDA loss being due primarily to the impact of inflation on costs. Village Farms said it had initiated an intensive operational review of the Fresh Produce business with the goal of optimizing the profitability of the business.
“In our Village Farms Fresh produce business, as anticipated we continued to be challenged by cost inflation across our operations, with significant year-over-year increases in most categories, including fertilizer and other inputs, packaging, freight, and labor costs, which has been exacerbated by the continued impact of the Brown Rugose virus that has impacted the global tomato industry. To date, we have not been able to pass these cost increases on to customers due to the continued oversupply in each of the tomato, cucumber and pepper markets. With the goal of optimizing profitability for Village Farms Fresh, we have initiated an intensive operational review of our operations. We believe strongly in the potential of these operations, especially for their optionality and considerably greater value as part of our cannabis strategy in a national or Texas state legal cannabis market in which we can participate.”
Village Farms said it couldn’t give an estimate for upcoming earnings and blamed COVID as the reason.
“We continue to expect the second half of 2022 to trend favorably for our Canadian Cannabis business, as we launch new SKUs, including new strains, across our brands into a market that continues to exhibit robust growth. In addition, the rollout of the Original Fraser Valley Weed Co. brand will enable us to address a considerable portion of the Canadian market that we previously did not. We also expect to increasingly benefit from integrating Pure Sunfarms and Rose to realize the significant synergistic opportunities that can take Village Farms’ Canadian Cannabis business to the next level.”
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