Tilray CEO ‘disappointed’ with ‘slow’ march towards US legalization, reports Q2 loss

Tilray Brands Inc. reported a second-quarter net loss of $61.6 million in its most recent quarter as the company temporarily slowed cannabis production due to its “longer-than-anticipated march toward legality.” market” in some markets.

Among the markets whose timing is holding up Leamington, Ont. pot company is the US, where its chief executive said, “we don’t expect (legalization) to happen anytime in the near future.”

“In the US, entering the adult cannabis market has always been very important to us and integral to our long-term strategy,” Irwin Simon told analysts on a call today. Monday.

“However, as long as marijuana remains illegal in the United States, we will not engage directly in the cannabis business to fully maximize the value and power of the business.” our US business.”

Marijuana is legal for medical purposes in about 39 states and recreational use in 19, including DC. However, federal law still considers it a Schedule I controlled substance with a high risk of abuse and unacceptable medical use, which classifies it as harder drugs like heroin, LSD, and peyote .

But last year, US President Joe Biden revealed that he would pardon people convicted under federal law of possession of marijuana and review marijuana’s status as a Schedule 1 substance.

The United States has also seen discussion around the Safe Banks Act, a Democratic bill with some Republican support that would allow financial institutions to work with companies in need. marijuana with impunity, and the Cannabis Reinvestment and Elimination Act (ADD), which would pave the way for federal legalization.

“I’m disappointed that the legalization, whether it’s Safe Bank, whether it’s the MORE Act, even if it’s repealed, nothing has happened to cannabis,” Simon said.

Still, even talking about such moves has fueled excitement at cannabis companies like Tilray, Canopy Growth Corp. and Aurora Cannabis Inc. They have long been buying shares of US brands in anticipation that the US will relax cannabis regulations and legalize marijuana on a federal basis.

Germany is also in the sights of these companies.

Olaf Scholz, the country’s prime minister, said in October that Germany would become one of the first places in Europe to achieve legalization and his health minister has since presented outlines of the potential regulations.

Simon feels Russia’s 2022 invasion of Ukraine has thwarted Germany’s plans as the battle between the two countries causes energy troubles and continues to fuel inflation.

“I’m sure that if Ukraine didn’t happen, Germany could be legal today, but we are ready and will be,” he said.

Simon’s comments came as he announced a net loss of $61.6 million in Tilray’s second quarter, compared with a net income of nearly $5.8 million in the same quarter a year earlier.

The cannabis company, which keeps its books in US dollars, said a loss of up to 11 cents per diluted share for the three months ended November 30 compared with net income of 0 cents per diluted share a year earlier.

Net sales for the quarter came in at $144.1 million, down from nearly $155.2 million in the same quarter last year.

The results come as Tilray’s cannabis business reported $49.9 million in revenue, down from $58.8 million in the same quarter last year, while its distribution business the company posted revenue of US$60.2 million compared with US$68.9 million a year ago.

To offset the competitive nature of the recreational cannabis market in Canada, which has seen a race to lower prices and oversaturation of stores in some areas such as Toronto, the company also has focused on drinks.

Tilray has a list of wine and beverage brands, including Montauk Brewing Company, SweetWater Brewing Company, Alpine, Green Flash and Breckenridge Distillery.

“All the big liquor companies have an eye on cannabis, just like the tobacco companies,” says Simon. “So with that in mind, if I can’t do anything in America these days and have to sit there, why not get bigger involved in some craft brewers like SweetWater, like Montauk, like Breckenridge ?”

Tilray’s alcoholic beverage business brought in $21.4 million in revenue, up from $13.7 million last year, and revenue from the wellness business totaled nearly 12.7 million US dollars, down from 13.8 million US dollars a year ago.

On an adjusted basis, Tilray said it posted a net loss of $35.3 million or 6 cents per diluted share in the most recent quarter compared with an adjusted net loss of $38.8 million. or 8 cents per diluted share a year earlier.

The results pushed Tilray shares down 10%, or 40 cents, to $3.55 in morning trading.

This report by The Canadian Press was first published January 9, 2023

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