CannTrust Posts Record Q4 Revenue, But Falls Short Of Expectations

CannTrust Holdings Inc CTST shares were plunging Thursday following the release of the Canadian cannabis company's results for the fourth quarter of 2018. Although CannTrust reported record revenue and lower cost of production, it also recorded a substantial loss on the back of higher expenses.

What Happened

CannTrust's revenue in the fourth quarter surged by 132 percent on the year to CA$16.2 million ($12.07 million). The revenue growth was dictated by an increase in active patient count from 37,000 a year earlier to 58,000 at the end of 2018, as well as an increase in sold dried cannabis equivalent from 758 kilograms to 3,407 kilograms.

The company's cash cost per gram sold declined from CA$5.16 to CA$2.94.

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The bulk of CannTrust's sales were made to the wholesale market, which includes sales to international markets, the Canadian recreational market and third-party licensed producers. The company sold 1,286.09 kilograms to the wholesale market. Another 377.92 kilograms were sold to the medical market.

At the same time, CannTrust reported a net loss of CA$25.52 million or CA$0.26 per diluted share versus net income of CA$6.25 or $0.08 per share a year earlier.

During the fourth quarter, the company said it invested to support its growth efforts through increased marketing spending to support the launch of its recreational brands, personnel costs and costs in preparation of its listing on the New York Stock Exchange that took place in February.

Why It's Important

CannTrust is one of the largest cannabis producers in Canada and one of the few cannabis pure-play companies listed on major U.S. exchanges alongside Aurora Cannabis Inc. ACB, Canopy Growth Corp CGC, and Tilray Inc. TLRY.

The company operates a 450,000-square-foot facility in Pelham, Ontario and was recently approved to build another 390,000-square-foot facility. It also has a preparation and packaging manufacturing center in Vaughan, Ontario.

What's Next

CannTrust expects to increase its production following the completion of a Phase 2 expansion of its facility and an upcoming Phase 3 expansion. It plans to reach 100,000 kilograms in annual production from its facility in the second half of 2020.

The company said it expects to further expand its production by an additional 100,000 kilograms to 200,000 kilograms of cannabis in 2020.

At the same time, CannTrust expects that its investments will continue to have an impact on its profitability, and the first-quarter adjusted EBITDA loss is expected to remain in-line with the fourth-quarter figure of CA$8.5 million.

CannTrust expects to return to profitability following the full realization of the increased capacity from the Phase 2 expansion.

The company's shares were down 15.34 percent at $8.50 at the time of publication Thursday. 

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