Aphria rises after first quarter results show another profit

Shares of Aphria (TSX:APH) are up today after the company reported solid first quarter results.

In its Q1, 2017, the licensed medical marijuana producer earned $895,269 on revenue of $4.37-million. The numbers were a solid beat over the same period a year earlier when it lost $476,825 on a topline of $950,740. The company posted EBITDA of $1.05-million.

The results follow on Q4, 2016 results in which Aphria earned $1.3-million on revenue of $2.77-million.

“Aphria continues to deliver on all operating metrics,” said CEO Vic Neufeld of the quarter. “Patient onboarding, harvest yields, delivering in-demand strains, kilograms sold and low production costs have again generated stellar top-line and bottom-line results. Completion of the part II expansion remains on schedule. Part III expansion just kicked off in the last two weeks. With expected annualized yields increasing to 18,000 kg upon completion of the expansions, Aphria is strategically positioned for continued sustainable growth.”

Aphria’s results were better than the street expected. In a research report from September 29, Mackie Research Capital analyst Neil Gilmer set was he said were high expectations of EBITDA of $900,000 on revenue of $4.2-million, but the company ultimately bested those numbers.

“We expect a solid quarter from Aphria next week,” said Gilmer. “We will also be looking at key metrics that we monitor on cost of goods sold per gram, both on a cash basis and all-in basis. In the company’s previous quarter it reported an all in cost per gram of $2.07 and cash cost of $1.15. We will look for modest improvement in those metrics in this quarter and management’s outlook on where they will trend towards in the upcoming quarters. The share price of Aphria has increased 134% since our launch in mid-April of this year as investor interest in cannabis stocks has been strong over the past 3 months. With positive industry fundamentals and Aphria’s operational execution, we believe next week’s earnings release will support our positive outlook on the company.”

Aphria has emerged as one of a handful of leaders in Canada’s nascent medical marijuana space. In April, the company announced it had entered into a $6.5-million deal to acquire 360,000 square feet of existing production space, located on 36 acres of land in Leamington, Ontario from its co-founder and COO Cole Cacciavillani. In April, Clarus Securities analyst Noel Atkinson said that deal put all other LPs behind Aphria.

“Aphria is already an industry leader in terms of production cost, profitability, registered clients, and sales volume,” said Atkinson. “This deal ticks the last box – scale of production facilities – to have Aphria now considered truly on equal footing with Canopy as the two top players in the Canadian MMJ sector and we would argue Aphria is more attractive than Canopy due to its much higher profitability.”

At press time, shares of Aphria were up 5.7 per cent to $3.51 as more than 3.5-million shares changed hands.

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