Canopy Growth Closes Two Greenhouses As Part Of Production Optimization Plan

Canopy Growth plans to close its facilities in Aldergrove and Delta, British Columbia, resulting in the elimination of approximately 500 positions. In addition, the company no longer plans to bring a third greenhouse online in Niagara-on-the-Lake, Ontario. These actions are part of the company’s effort to align supply and demand while improving production efficiencies over time.

The greenhouses in B.C. account for approximately 3 million square feet of licensed production space and were put into commission, beginning in February 2018, after a period of phased retrofitting to help Canopy Growth scale up to supply the new Canadian adult-use market.

“Nearly 17 months after the creation of the legal adult-use market, the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry,” Canopy Growth said in a statement. “Additionally, federal regulations permitting outdoor cultivation were introduced after the company made significant investments in greenhouse production.”

Canopy Growth now operates an outdoor production site to allow for more cost-effective cultivation, which will play an important role in meeting demand on certain products that rely on cannabis extracts. Following an organizational strategic review of production capacity and forecasted demand, the company decided that these facilities in Aldergrove and Delta, British Columbia, are no longer essential to its cultivation footprint.

The company expects to record estimated pre-tax charges of approximately $700-800 million in the quarter ending March 31, 2020, reflecting this announcement as well as additional changes related to its organizational and strategic review.