Article content continued
In its statement, however, Canopy said it would move to an “asset-light” mode in the country by abandoning cultivation plans, but keeping it as its Latin American hub to produce finished cannabis products such as soft-gel capsules.
“We are not surprised Canopy is transferring ownership of its local operations in South Africa/Lesotho while abandoning cultivation in Colombia,” said Andrew Carter, a cannabis analyst at Stifel Financial Corp. “While a number of countries have legalized marijuana for medical use, the pace of implementing commercial systems has been well below the industry’s aggressive projections.”
Winners in the space don’t have to be farmers
Matt Bottomley, a long-time cannabis analyst at Canaccord Genuity Corp., said Canopy’s operational changes move it away from cultivation and toward being a consumer-packaged-goods company that purchases biomass instead of growing it.
“Winners in the space don’t have to be farmers,” he said. “There is way too much licensed cannabis growing space in Canada, and even in places like Colombia, so it’s a good decision to move out of that.”
The $800-million impairment charge Canopy is absorbing includes the shutdown of its B.C. facilities, 2.6 million acres of greenhouse space in total, which it had purchased for almost $400 million.
“This is all probably a good thing for the company, but it shines a light on just how much they might have overshot with the acquisitions,” Bottomley said. “When you restructure operations at such a huge impairment, it just goes to show how much of Canopy’s money was poorly allocated to begin with.”
? Email: firstname.lastname@example.org | Twitter: