Canopy Growth Corp. (TSX:WEED) (NASDAQ:CGC) announced that it is undertaking a series of initiatives, including layoffs, to reduce costs and drive efficiency in order to accelerate its path to profitability.
Aligned to Canopy Growth’s FY23 strategic review, the Company announced it is conducting the following actions:
- Reducing the cost of goods sold (“COGS”) in the Company’s Canadian cannabis business by lowering per-gram cultivation costs through increased cultivation-related efficiencies and facility improvements;
- Implementing a flexible manufacturing platform inclusive of contract manufacturing for certain product formats;
- Rightsizing indirect costs and generating efficiencies across the Company’s supply chain and procurement;
- Aligning selling, general and administrative costs with short-term business expectations by reducing third-party professional fees and office costs; and
- Further streamlining the organization to drive process-related efficiencies.
- Lay Offs Coming
- As a result of these changes, Canopy announced that team members "will be impacted as the Company will operate with a reduced headcount moving forward." Canopy did not announce how many jobs will be affected.
“The savings and operational efficiencies generated through these additional steps reinforce our commitment to driving Canopy to profitability,” said Judy Hong, Canopy Growth’s CFO. “Achieving profitability in our Canadian business is critical to the success of our Company and will ensure we can continue investing in our key strategic growth areas including US THC to build significant long-term value."
Canopy management said it expects to generate COGS savings of $30 – $50 million and reduce SG&A expenses by $70 – $100 million within 12-18 months. These savings are incremental to the previously announced cost savings of $150-$200 million, of which the majority have already been achieved.
As a result of these strategic changes, management anticipates charges between $250 – $300 million in Q4 FY2022, the majority of which will be non-cash and relate to the write-down of excess inventory balances as well as “property, plant and equipment” impairments.
The Company said it expects to incur between $100 – $250 million in non-cash impairment charges in Q4 FY2022, largely driven by goodwill and intangible asset impairments.
Canopy's full press release is available here.
