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Report Warns of Legalization Day Shortage

Canadian think tank estimates there won’t be enough green on game day.

Photo by Bruno van der Kraan on Unsplash

At the rate pot producers are going, there’s going to be a shortfall of cannabis in Canada on October 17th. This news is according to the C.D. Howe Institute, a Canadian think tank.

The current legal marijuana supply in that country will meet between 30 and 60 percent of estimated demand, according to numbers the institute released this week.

The think tank estimates demand across Canada is around 610.6 tonnes, but the available pot supply in the fourth quarter of this year is 146.13 tonnes.

Short-lived shortfall?

The shortfall is likely “short-lived,” according to the author of the report. Supply is forecasted to increase as more licenses are granted, and production capacities increase.

Aphria Inc. (TSX: ACB.TO), a major Canadian producer, said in its latest financial report it was “unable to fill all of the open greenhouse positions due to a lack of qualified local labor, which left it with insufficient staff to harvest the levels of production produced in the Aphria One greenhouse.”

According to the company’s CEO, Vic Neufeld, the company will resolve supply issues in the short term. Aphria Inc. will likely erase the supply shortfall after two or three months, Neufeld said.

Staffing shortage and red tape

Staffing isn’t the only issue for the company. Government excise stamp delays and workers required to apply the stamps to products, is also delaying production, according to Neufeld.

Notably, time is of the essence for growers. “As a result of the lower staff levels, one week’s crop rotation outgrew its optimal harvest period.”

Still profitable

Nonetheless, the company achieved year-over-year growth and profit. The weed firm reported earnings close to $21.2 million in the last quarter, an increase of $15 million from that quarter in 2017.

Aphria’s profit was down one cent as a result of share dilution, however. The last quarter’s profit was nine cents per share, compared to a profit of 10 cents per share after issuing shares in the interim.
Revenue for the three-month period ending Aug. 31 totaled $13.3 million, up from $6.1 million.

The earnings increase results from investments in Liberty Health Sciences and Hiku Brands Co. Ltd. Additional earnings growth came from an increase in the value of its assets from pot production.

Shares of the company surged higher in early trading this week on reports that U.S. tobacco company Altria Group Inc. was in talks with Aphria to acquire a minority equity interest, possibly leading to a majority stake.

Aphria commented that while it has discussions with potential investors, there was no understanding, contract or agreement currently in place.

Written by Rob McLean

Rob loves staying on top of developments in the cannabis sector, and always has his finger on the pulse of real estate markets.

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