To Cut Costs, Aurora Cannabis Will Slash 700 More Jobs and Close 5 Facilities
Canada’s Aurora Cannabis said Tuesday it would lay off hundreds of employees and shutter multiple manufacturing facilities as part of a massive turnaround effort aimed at cutting costs and achieving profitability in 2021.
In a news release, the Edmonton, Alberta-based marijuana firm said headcount reductions would impact 25% of its corporate workforce, as well as 30% of its production employees.
The layoffs are expected to occur over the next two quarters, and the majority of affected corporate workers will be laid off immediately, the company said.
Recall that Aurora eliminated 500 jobs, including 25% of its corporate positions, in February.
The latest round of cuts, which also included a “restructuring of the executive leadership team,” will affect roughly 700 employees (about 30% of its total workforce), according to Yahoo Finance Canada.
Aurora’s chief product officer Shane Morris, who joined the company in January 2018, is no longer with the company, Marijuana Business Daily reported.
Morris addressed his departure on Twitter, saying that “change is a difficult thing, but every change brings opportunity.”
“The last several years have been both the most challenging and the most rewarding,” he wrote. “Building teams from scratch, working with amazing people, helping patients, creating and producing the most innovative products in the Canadian cannabis market & beyond. So many firsts & so many bests that have made millions. Glad to say I & my teams’ work created improvement in an organization and industry since we joined.”
In addition to the widespread layoffs, Aurora will also close five “smaller scale” facilities throughout Canada — including its Aurora Prairie (Saskatchewan), Aurora Mountain (Alberta), Aurora Ridge (Ontario), Aurora Vie (Quebec) and Aurora Eau (Quebec) locations — over the next two quarters.
Combined, the five indoor cultivation facilities span nearly 300,000 sq. ft. and have the capacity to produce over 40,000 kg (88,000 pounds) of cannabis annually, according to Aurora’s website.
In a note to investors, Cowen analyst Vivien Azer said the soon-to-close manufacturing sites provide 20% of Aurora’s volumes but account for approximately 40% of its production costs.
Nevertheless, the closures “should optimize” Aurora’s supply chain and “provide support” to gross margins, Azer noted.
“We continue to think that ACB is taking the right steps to turn around the business,” she wrote, maintaining an “outperform” rating on the company's stock, which fell 1% during regular trading on Tuesday.
For his part, interim CEO Michael Singer said the rationalization efforts were not just about trimming back expenses.
“We have undertaken a strategic realignment of our operations to protect Aurora's position as a leader in key global cannabinoid markets, most notably Canada,” he said via the release.
The company expects to record upwards of C$60 million in impairment charges during the fiscal fourth quarter of 2020 as a result of the facility shutdowns.
It also anticipates C$140 million in charges related to “the carrying value of certain inventory, predominantly trim, in order to align inventory on hand with near term expectations for demand.”
Nevertheless, Singer said the facility closures and inventory adjustments will benefit the company as it leans out and becomes more efficient.
“Both the Canadian facility rationalization and inventory revaluation are expected to improve gross margins and accelerate our ability to generate positive cash flow,” he said. “We believe that we now have the right balance for the long-term success of Aurora — market leadership, financial discipline, operational excellence, and strong execution. We remain focused on making Aurora a profitable and robust global cannabinoid company."
It remains unclear what Aurora’s future plans are for the five facilities, however Azer noted that the company could explore asset sales in an effort to “bring incremental cash and stability to the balance sheet.”
In recent months, Aurora has divested a number of notable assets in its quest to become profitable.
The company exited its position in Alcanna at a significant loss earlier this month, recouping just $20 million of the $100 million it spent in 2018 for a 23% stake in Canada’s largest alcohol retailer (which also owns several cannabis dispensaries).
In April, Aurora sold a greenhouse in Exeter, Ontario, for C$9 million, nearly half of the C$17 million it was seeking when it listed the property earlier this year. Aurora also sold a property in Jamaica property for $3.4 million.
Today’s announcement comes one week after Aurora announced that co-founder Steve Dobler would step down as president and board director at the end of the month.
In early February, fellow co-founder Terry Booth stepped down as CEO, and about two months earlier, chief corporate officer Cam Battley was reportedly ousted from the firm. The company’s chief of global business development, Neil Belot, also departed in December.
Last month, Aurora said it would make its formal entry into the U.S. market via the acquisition of CBD company Reliva in an all-stock transaction valued at nearly $40 million.
The company reported higher-than-expected revenue growth during its fiscal third quarter, however it still recorded a net loss of C$137 million.
Aurora officials did not respond to THCnet’s request for additional comment as of press time.
More information can be found in the company’s official news release.