Hexo Corp (NYSE:HEXO) has reported cannabis revenues of $19.3 CDN in Q1 2020. Founder and Chief Executive Officer of Hexo, Sebastien St-Louis, said the company has adopted cost-saving measures, introduced innovative products, updated strain mix and chose a multi-brand approach. According to the Sebastien, all these efforts are yielding desired results and helped to achieve savings of 25% in operating expenses. The company expects to report improved revenues and enhanced market share next year.
The shipped revenues of Hexo declined from $22.8 million CDN in Q4 2019 to $20.2 million CDN in Q1 2020. However, sales of adult-use products have surged to 4,196 kg (up 5%) in Q1 2020. The demand for high THC products is growing.
Hexo has reported an impairment loss of $25.5 million CDN on inventory. It is on account of reduced demand for cannabis distillates and excessive cannabis trim and milled products that account for $16.4 million CDN.
Oil-based finished goods worth $3.4 million CDN is impaired because they could not capture the market share. Certain provinces have returned oil products having package dates over 3 months and contributed to the impairment.
Hexo has arranged a credit facility for $65 million CDN from a consortium of chartered banks in Canada. The credit facility comprises $15 million CDN of revolving credit and $50 million CDB term credit. Hexo will use this credit facility Gatineau Campus expansion and for improving Belleville facility.
Hexo is putting in significant efforts to improve the processing facilities and boost yields. It will recommence the operations in the suspended areas based on the need. The annualized production of Hexo is 90,000 kg of dried cannabis. It comprises dried flower (50%) and the remaining trim. The company is striving to improve the annualized production to 100,000 kg.
Hexo plans to introduce new products to drive sales growth. It will also reduce operational spending to realize more profits. The company will commission the sophisticated production facility at Belleville.
Hexo offers original stash in Ontario and Quebec. It expects to offer original stash in BC and Alberta soon. The company holds a market share of 33% in Quebec. In H1 2020, the company achieved significant progress in introducing beverages with the help of its partner Molson Coors in Canada.