Valens Groworks Enjoys Profitable Quarter After Revenue Growth

Extraction firm Valens Groworks Corp. [stock_market_widget type="inline" template="generic" color="default" assets="VGW" markup="(TSXV: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] swung to a $5.9 million net profit in Q3 after enjoying a sharp sequential rise in revenue.

The firm brought in revenue of $8.8 million in Q2 2019 and suffered a net loss of $10.5 million. Revenue increased 87% to $16.5 million in Q3 and it achieved a gross profit of $12.8 million, which helped it secure net income of $5.9 million for the quarter.

Valens Groworks, which is based in Kelowna, British Columbia, ended Q3 with a robust cash balance of $69.2 million in cash and cash equivalents. It had a net working capital position of $84.1 million as of Aug. 31, 2019.

“The Company’s performance in the third quarter clearly demonstrates our industry leading technical capabilities, the quality of our products and the earnings power of our platform,” said chief executive Tyler Robinson.

He said he expected margins in future quarters to maintain a strong upward curve. However, he added that Q3 margins were boosted by “a one-time contract opportunity” that is unlikely to be repeated in the future.

Yet he still proudly declared that the firm’s net income in the quarter has made it the most profitable public company in the Canadian cannabis sector, with the highest net income margin after excluding fair value adjustments.

It processed 26,625 kg of dried cannabis flower at its Kelowna facility during the quarter, and it has since processed 13,423 kg in the first 45 days of Q4.

It has also just tied up a supply deal with nationwide retailer Shoppers Drug Mart. It will furnish the company with cannabis oil products for sale on its online store.

It has also agreed to work with Iconic Brewing to produce 2.5 million cannabis beverages over the next five years. The plan is now to tie up more deals with Canadian producers to fulfill its capacity and grow its business.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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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