Cronos Group (NASDAQ: CRON) (TSX: CRON) posted a 38% increase in third-quarter revenue, driven by strong cannabis flower and extract sales in Canada, where its Spinach brand has climbed the market leaderboards.
The Toronto-based cannabis producer generated net revenue of $34.3 million in the third quarter ending Sept. 30, up from $24.8 million a year earlier, according to results Tuesday. The figure beat Yahoo Finance’s average analyst projection by around $5 million. The company posted net income of $7.3 million versus a loss of $1.6 million in the same period last year.
“Our results this quarter demonstrate that our long-term strategy is working,” CEO Mike Gorenstein said in a statement. “With record net revenue and a disciplined approach to operating expenses, Cronos operates more efficiently and effectively than ever before.”
The company’s Spinach brand became Canada’s top-selling cannabis brand in August, capturing the number one position in flower with a 6% market share and leading the edibles category with a 17.2% share, according to Hifyre retail analytics data cited by the company.
The results were bolstered by Cronos’ consolidation of Cronos Growing Co. (GrowCo) after making an additional investment and gaining board control in June. The GrowCo transaction added $4.3 million in cannabis flower sales in the quarter.
Internationally, Cronos reported strong momentum in Israel despite regional conflicts, while also seeing early traction in Germany and the U.K. with its Peace Naturals brand. The company maintains a balance sheet with $862 million in cash and cash equivalents.
“As international demand continues to rise, particularly in markets like Germany, the UK, and Australia, the investments we’ve made in our infrastructure and global partnerships are paying off,” Gorenstein noted.
The company faces a potential headwind in Israel, where regulators launched an anti-dumping investigation in January examining Canadian cannabis imports. In July, authorities proposed a 369% duty on Cronos’ imports, though no provisional duty has been imposed pending the investigation’s conclusion.
“The company previously responded to requests for information from the (Israel Ministry of Economy and Industry) and is providing additional information,” Cronos noted in filings. “The company cannot predict the outcome of the investigation.”
It added, “We expect litigation and regulatory proceedings relating to the marketing, distribution, import and sale of our products to increase.”
Gross margin contracted to 11% from 16% a year ago, which the company attributed to inventory-related purchase accounting adjustments from the GrowCo consolidation. Adjusted gross margin, which excludes these one-time effects, expanded to 31% from 16%.
Cronos reiterated its previously announced operating expense savings target of $5 million to $10 million for 2024, as the company continues to focus on profitable growth.
[[{“value”:”CEO sees “long-term margin improvement” after GrowCo integration, despite challenges in Israel.
The post Cronos sales jumps 38% as Spinach brand nabs top spots in Canada appeared first on Green Market Report.”}]] Read More
