Cannara Biotech Market Share Gains Result In Record-Setting Fourth Quarter
Detroit, Michigan
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December 20, 2023 09:00 AM Eastern Standard Time
By Meg Flippin, Benzinga
Thanks in part to market share gains and increasing demand for high-quality cannabis at an affordable price in Canada, Cannara Biotech Inc. (OTCMKTS: LOVFF), the vertically integrated producer of premium-grade cannabis and derivative product offerings, reported record growth in revenue and net income for its fourth quarter of 2023.
For its fiscal fourth quarter, Montreal-based Cannara Biotech reported a more than 50% increase in net revenues, gross profits that rose 45% and adjusted EBITDA that was up 88% year-over-year. For the full year, adjusted EBITDA increased 140%, underscoring the company’s strength in its financial strategy and operational efficiency efforts.
Bringing Efficiencies To The Market
“Net income of $4.8 million for the fourth quarter and more than $7 million for the year showcases how the company is in expansion mode”, Cannara Biotech said when reporting earnings. During the third quarter, the company was able to activate three additional 25,000-square-foot grow zones ahead of schedule that are expected to pay off in the fourth quarter and beyond. Cannara’s one million square foot state-of-the-art Valleyfield Facility is now cultivating out of 9 of its 24 grow zones, with over 100,000 plants under cultivation between both facilities, producing over 30,000 kg of premium-grade cannabis per year. In addition to Cannara’s strength in its assets and acute focus on operational efficiencies, Cannara is also focused on innovation, bringing more than 70 new SKUs to market in 2023 driving profitability and market recognition. Cannara Biotech expects to expand its product line further to stand out in a crowded field.
"Our net income growth – 89% for the quarter and over 200% for the year – signifies more than just numbers. It reflects our strategic vision and the distinct competitive edge we have as a leading Quebec-based producer,” said Zohar Krivorot, President and Chief Executive Officer when reporting earnings. “Importantly, our fourth quarter showed significant sequential growth over the third quarter of 2023, with higher revenue by 15%, operating income by 39%, Adjusted EBITDA by 23% and net income by 65%. Looking to 2024, we expect to see these figures grow even further as we continue to increase our market share across Canada.”
Demand For Cannabis Growing In Canada
Cannara Biotech is riding the wave of growth from the Canadian cannabis market. By 2030, it is forecast to reach $12.2 billion, growing at a CAGR of 13.4% over 2021-2030. Recreational cannabis was legalized in 2018, creating a new market that saw the entrance of several players. Growth is being driven by younger consumers who have positive attitudes about cannabis and are more likely than their older counterparts to purchase recreational cannabis.
Standing out in the market is tough, given brutal climates that make it difficult to grow. Plus given the regulatory hurdles and high start-up costs, the barriers to entry and the ability to succeed in the Canadian cannabis market can be difficult to accomplish, which makes Cannara’s results positive for its investors. The company operates two huge facilities spanning over 1,650,000 square feet in Quebec, where it churns out quality cannabis products en masse using its access to low-priced utilities in the Province and lean operational structure to keep costs down.
Quality = Market Share Gains
Cannara’s positive cash flow position of $2.8 million at the end of the fourth quarter and $5.4 million for fiscal 2023 allows it to expand organically and continue offering high-quality cannabis products at an affordable price. The company is still at the beginning of its growth, with only 35% of its production capacity activated, and operates in only five main markets in Canada, resulting in many strategies in Cannara’s toolkit to potentially increase its revenues and market share quarter over quarter.
In Ontario, Cannara gained enough market share to move up to the ninth spot and the company plans to improve that in 2024. Since launching in Alberta in May, the company has seen a 1,100% increase in product sales. In Quebec, Cannara has maintained its leadership position ranking as the third-biggest producer in the region. Meanwhile in British Columbia market share increased 60% in the fourth quarter compared to the third quarter.
“These successes across various provinces underscore Cannara's growing influence in the Canadian cannabis industry. As we cement our position as a true player in the market, our trajectory is clearly set towards becoming a leader in this competitive landscape," Nicholas Sosiak, the company’s CFO said.
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