• Ted Ohashi

2019 is shaping up to be a disappointing year for Canadian cannabis producers

Apparently the wet weather in Ontario is causing mould problems for cannabis growers. My interest was tweaked by the Hindenburg Research report knocking Aphria (NYSE: APHA) in which a former employee was quoted as saying APHA’s Leamington, Ontario grow facility had a significant mould problem. On November 23, 2018, RedeCan, an Ontario grower, had a voluntary product recall due to mould issues. On January 4, 2019, Up Cannabis, also in Ontario, had a product recall for mould and microbial contaminants.

Next I was contacted by a long time reader who lives and works in this region of Ontario who said the rainfall is causing major mould problems in the region as well as construction delays. He also told me that Aurora’s Exeter one million square foot greenhouse that came with the MedReleaf acquisition sits in a state of disrepair with no construction or retrofitting apparent. This is not the first time I have heard from this reader and his information has always been accurate.

I think 2019 is shaping up to be a year of disappointment for the publicly traded Canadian LPs. For example, Aurora Cannabis recently provided revenue guidance for its second quarter pointing to sales of $50 to $55 million. This was well below the $67 million average forecast by analysts. This is just another reason I believe investors should be looking outside of Canada in investment portfolios. From my list, looking at the smaller cap opportunities this would mean 1933 Industries (CSE: TGIF), Khiron Life Sciences (TSXV: KHRN) and Sunniva (CSE: SNN).

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