Aurora CEO Eyes U.S. Amid Looming ‘Carnage’ For Canadian Pot Industry

Article by David George-Cosh, BNN Bloomberg

EXECUTIVE Commodities Marijuana 19h ago Aurora CEO eyes U.S. amid looming 'carnage' for Canadian pot industry By David George-Cosh Terry Booth, chief executive officer of Aurora Cannabis Inc., speaks during a news conference at the Toronto Stock Exchange (TSX) in Toronto, Ontario, Canada, on Monday, May 14, 2018. , Cole Burston/Bloomberg

There are a few things that still keep Terry Booth up at night.

Aside from the Aurora Cannabis Inc. chief executive officer’s seven-month-old daughter, which he dutifully dotes on, Booth can’t help but shake his company’s stock performance as of late.

“As the CEO, you really want to know how the market is differentiating us,” Booth said in a rare, wide-ranging interview with BNN Bloomberg. “I am less worried about [cannabis] demand, obviously.”

While Aurora’s stock has indeed suffered, trading down 51 per cent over the past year, Booth continues to remain optimistic on the company’s prospects. He highlights how the U.S. remains a crucial market for its CBD product ambitions, while reiterating a firm focus on governance and managing its finances to retain investor confidence in an industry beset by steep losses.

And there might be more turbulence to come.

Booth said there could be “carnage” in Canada’s cannabis industry over the next year if some producers remain unable to drop their cost of producing their cannabis amidst what has become an oversupplied market.

Canopy Growth Corp. and Tilray Inc. are two leading cannabis producers, which, according to Raymond James analysts, have high production costs per gram, while Aurora has turned itself into a low-cost player, joining Organigram Holdings Inc. and Village Farms International Inc.

“I think you’ll see some carnage in the production area when people are growing it for $4 and $5 a gram, [when] we’re doing it for less than a buck,” Booth said. “We’re not going to want to get into any price wars but if the market does go down in pricing because of oversupply, we’re best prepared to deal with it.”

Booth said the company’s US$400 million at-the-market equity financing program it secured earlier this month will give the pot giant some agility to handle its operations during the current downturn, which is something that most of the market may not be able to stomach in the coming months.

“[Banks] threw money around like it was spaghetti,” he said. “These companies that never stopped thinking money was going to be available to them [forever] are going to be in a world of hurt.”

Meanwhile, Booth has put his own money where his mouth is, snapping up 270,000 Aurora shares earlier this week for nearly $1 million, a move he said is aimed at showing investors he remains confident in the company’s business, despite what the market thinks of it.

“Remember, they used to value our companies based on the size of our vault and then based it on the size of our licence, and then they based on the funding capacity and they’re finally moving towards can these guys make money,” Booth said.

“It’s going to wash itself out and common sense normally prevails. The timing of that common sense is imperative for us to properly adjust our business operations and put our big boy and big girl pants on to make sure that we run it like a business – and that’s what Aurora intends to do.”

That doesn’t mean that Aurora, possibly the biggest buyer in the sector after its $2.5 billion deal for MedReleaf, is looking to end plans to acquire more companies. Market conditions may result in a bevy of opportunities on both sides of the border for Aurora to take advantage on, but Booth isn’t interested in paying for companies that need a lot of money to be built up anymore. Instead, he’s eyeing deals that would be a good fit for the Edmonton-based firm both culturally and operationally.

“The deals that we’ll do in the near future would be ones that, first off, we’d want to be accretive, or soon-to-be accretive, and have great stories about them. We don’t want to buy a bag of bones, any distressed assets that we’ve got to throw a lot of capex at,” Booth said.

Earlier this month, Aurora decided to cease construction on its Nordic 2 facility in Denmark, a move that is aimed at saving the company $80 million over the next 12 months. Booth acknowledged that demand in the European market may have been “overestimated,” resulting in the pullback, noting that it “will take some time” for the continent’s medical community to become better educated on prescribing cannabis to their patients.

Read the full article here.

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