In the second quarter, Aurora Cannabis (ACB) sold cannabis at a cheaper rate compared to the previous quarter. The company’s cash cost per gram increased, which makes it easy to see why the company’s margins contracted during the quarter.
Per gram metrics
In the above chart, you can see that sequentially, Aurora Cannabis’s cash cost per gram in the second quarter increased to 1.92 Canadian dollars per gram from 1.45 Canadian dollars per gram in the previous quarter and from 1.41 Canadian dollars per gram in the second quarter of 2018.
Aurora Cannabis’s average net selling price per gram for dried cannabis fell to 6.23 Canadian dollars per gram from 8.39 Canadian dollars per gram from the previous quarter and from 7.86 Canadian dollars per gram from the second quarter of 2018. The average net selling price for cannabis extract declined to 10 Canadian dollars per gram from 12.12 Canadian dollars per gram and from 13.35 Canadian dollars per gram in the second quarter of 2018.
What caused this drop?
According to Aurora Cannabis, the introduction of excise tax across the sales channel in Canada and lower wholesale pricing in the consumer or recreational market contributed to the decline in the average selling prices per gram. The company stated that it “intends to continue prioritizing medical patients in Canada and globally where margins continue to exceed those achieved on the wholesale consumer market.”
A decline in the prices due to consumer markets might be seen across companies (HMLSF) like Canopy Growth (WEED), Tilray (TLRY), and Cronos Group (CRON).
Aurora Cannabis stated that its cash cost per gram increased due to the optimization of facilities and one-time costs related to the recreational market launch, which the company thinks is temporary.
Next, we’ll discuss Aurora Cannabis’s capacity.