Emerald Expects Soaring Revenue from Pure Sunfarms

Emerald Health Therapeutics expects Q1 2019 revenues at its Pure Sunfarms joint venture to exceed $14 million.

The firm teamed up with tomato producer Village Farms International to create Pure Sunfarns, a sprawling greenhouse in British Columbia. They each own 50% of the facility and Emerald reported that its share earned it $1.4 million in Q4 2018.

However, its production capacity is rapidly expanding and it will be able to produce 75,000kg of cannabis flower per year by mid-2019. Last month it announced plans to double production capacity, which will see its output increase to 150,000kg per year and make it a major player in the Canadian cultivation trade.

It is yielding more cannabis each quarter and Emerald said its revenue shot up in Q1 and will continue spiralling. “Pure Sunfarms’ 1.1 million square foot facility is now rapidly increasing production and sales,” said Avtar Dhillon, who is managing director, president and executive chairman at Emerald. “By leveraging our own technical expertise and infrastructure with strong partners in 2018, we solidified key building blocks with respect to production/supply, distribution, processing in the form of large-scale extraction, softgel encapsulation, and product innovation.”

Verdélite Update

Emerald reported a net loss of $13.9 million in Q4 2018 as a result of investment in expanding its capacity. That brought its annual loss for 2018 up to $31 million, with revenue of slightly more than $2 million, although the bulk of that came in Q4. It also brought in $6.4 million from its share of Pure Sunfarms.

The firm also owns 51% of Emerald Health Naturals, which will begin to sell non-cannabis natural health products for endocannabinoid systems across Canada by mid-2019. It has bought an additional production facility in Quebec called Verdélite, and it has just announced that the vendor has elected to receive $7.5 million of the final $22.5 million payment it is due in the form of common shares in Emerald, at a discounted 10% price.

The Jewel in Emerald’s Crown

With Pure Sunfarms’ all-in production costs below $1 per gram and bulk cannabis selling for $7/gram in Canada, they have a significant margin.

However, Pure Sunfarms is its most important operation and Emerald said it is approaching its target of achieving all-in production costs below $1 per gram. Bulk cannabis currently sells for more than $7 per gram in Canada, leaving Emerald and Village Farms with a significant margin.

In March Emerald tied up supply deals with Alberta Gaming, Liquor and Cannabis and the Saskatchewan Liquor and Gaming Authority, adding to existing sales arrangements in Ontario, British Columbia, and Newfoundland and Labrador.

Shares in Emerald opened $3.68 on Wednesday, May 1, after announcing its results. That is a significant decrease on the $3.92 it closed at on Tuesday, Apr. 30, although it is still well ahead of the $2.20 it dipped to on Dec. 27, 2018.

Village Farms came under fire from Citron Research a fortnight ago and that sent its stock tumbling from $17.25 to $13.99 in just an hour on Apr. 17. However, it has since recovered most of that decrease and it opened at $16.66 today.

Emerald promised “a year of extraordinary sales growth” in 2019 and Village Farms should also see revenues increase sequentially as Pure Sunfarms continues to yield more low-cost marijuana.

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Martin Green
Martin Green is an experienced journalist with a strong focus on the cannabis, alcohol, and gambling industries. He is particularly interested in the political issues affecting the global marijuana trade, and he has a keen focus on regulation changes and legal topics. He holds a BA English Literature, MA Creative Writing and a National Qualification in Journalism diploma. He has worked in journalism since 2009 and written for a broad range of newspapers, business titles and magazines, including The Sun, The Metro, The Journal, Livestrong, Drinks Retailing News, Harpers, Sportsbook Review, Vital Football, Essex Live and Surrey Live. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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