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The Green Organic Dutchman’s 3Q gains traction from entry into the recreational cannabis market

The Ontario pilot project signaled strong demand for high-quality flower and showed it is well positioned to capture the premium organic segment

The Green Organic Dutchman Holdings Ltd - The Green Organic Dutchman’s 3Q gains traction from entry into the recreational cannabis market
As part of a revised strategic plan, the company will reduce general and admin expenses by $3 million per quarter starting in the first quarter of 2020, on a path towards positive operating cash flow

The Green Organic Dutchman Holdings Ltd (TSE:TGOD) (OTCMKTS:TGODF) CEO Brian Athaide said the third quarter saw traction from the company’s entry into the recreational cannabis market. 

In a statement accompanying the company’s latest numbers, Athaide said: “The third quarter marked TGOD's entry into the recreational cannabis market with a small pilot in Ontario. We were thrilled to witness such positive feedback on product quality and packaging from retailers and consumers across the province.” 

“Based on the initial response, demand for high-quality flower is strong and TGOD is well positioned to capture the premium organic segment which is significantly underserved," he added.

READ: The Green Organic Dutchman secures C$103M for Ancaster and Valleyfield facility completion

The company entered the recreational market with a small pilot project in Ontario, bringing total Canadian sales to $0.6 million. The company said it is scaling production in the grow spaces to be able to fully supply the Ontario Cannabis Store and other cannabis boards on a “consistent basis” and prepare for the launch of the first wave of its cannabis 2.0 product portfolio at the end of the fourth quarter.

The entry into the recreational market is a big deal because up until now the Green Organic Dutchman’s operations have mainly focused on medical cannabis in Canada, Europe, the Caribbean and Latin America, as well as the Canadian recreational market.

Established by Dutch founders, the company grows organic cannabis in high-technology, eco-friendly and sustainable facilities. The cannabis is grown naturally in Canadian soil without the use of synthetic pesticides, herbicides or fertilizers and wrapped in eco-friendly packaging.

"Despite the challenging market conditions in Canada, TGOD has an opportunity to be one of the first cash flow positive cannabis companies as early as second quarter of 2020,” said Athaide.

“We rightsized our production and our first hybrid greenhouse is being commissioned, allowing us to produce at optimal levels while avoiding excess inventory or incurring unnecessarily high operating expenses.”

The TGOD boss pointed out that the company’s first harvest from the Ancaster hybrid greenhouse is expected in December, which will enhance its current product line and enable TGOD's first material revenues in Canada in the first quarter of 2020.

Business Highlights

The company posted a net loss of $20.1 million for the third quarter of which $4.3 million was related to non-cash stock-based compensation, depreciation and amortization.

As part of a revised strategic plan, the company will reduce general and admin expenses by $3 million per quarter starting in the first quarter of 2020, on a path towards positive operating cash flow by the end of the second quarter, said the company.

HemPoland, its wholly-owned subsidiary, saw a sequential decrease in revenue to $2 million in the third quarter, compared to $2.9 million in the previous quarter due to fewer low margin bulk CBD extract sales.

However, the company said it saw a spike in sales of its high margin branded CannabiGold and private label products, resulting in gross margin of 80%, up from 69%. The company said it has updated product formulations to penetrate new European markets.

Ancaster and Valleyfield facilities

Meanwhile, the company said it continued construction of its Ancaster and Valleyfield facilities, investing $104 million during the quarter. The company said Valleyfield Phase 1 will consist of six zones and its production will be shipped to Ancaster for processing.

The company also completed and commissioned its 20,000 square foot Phase 2 indoor cultivation facility at Ancaster and started growing operations within the state-of-the-art facility.

TGOD also substantially completed the 101,000 square foot Ancaster hybrid greenhouse shortly after the quarter's end in October.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

 

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Price: 0.83 CAD

TSX:TGOD
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