Cannabis producer Cronos Group (CRON) revenues jumped 186% to CAD3.76 million for the third quarter 2018, aided by strong sales growth of dried cannabis and cannabis oils. However, net loss came in at CAD0.04 per share compared to earnings per share of CAD0.01 in the prior year period. During the pre-market hours, the stock was down over 4% trading at $8.
Cronos sold 514 kilograms in the third quarter, which spiked 213% compared to 164 kilograms sold in the prior year period. The increase was primarily due to strong demand from its clients, which has been catered by enhancing production at its facilities. The increased production is expected to bode well for the company in the future.
It’s worth noting that sales of cannabis oils continue to grow bringing in CAD1.07 million, which contributed 29% to the top line in the third quarter. The increased oil sales trend is going to benefit Cronos’ bottom line due to higher margins compared to dried cannabis. In the third quarter, average sales price/gram for oils stood at CAD9.17 compared to CAD6.60 for dry cannabis.
Operating expenses shot up 242% to CAD6.97 million compared to CAD2.03 million last year. The jump in expense was primarily due to increased personnel costs due to ramp up in hiring and consulting fees paid for strategic partnerships.
To expand its global footprint and research, Cronos has been partnering with various firms in 2018. In September, the company joined hands with Ginkgo Bioworks to come up with an affordable solution for producing cultured cannabinoids, which is expected to bring down oil extraction costs which traditionally takes more time and money.
Last month, the company inked a research partnership with Israel-based Technion to conduct clinical studies for the treatment of psoriasis, wound healing and acne. To cater to Latin American markets, Cronos floated a joint venture with Colombian-based Agroidea which would focus on cannabis cultivation and production.
After Uruguay, Canada is the second country globally to legalize weed sales for recreational purpose. The announcement which came last month is expected to benefit Cronos and its peers. Commenting on the announcement, CEO Mike Gorenstein stated, “watershed moment for our industry and our Company.” Investors expect fourth quarter revenues to jump for Cronos from Canada post the weed sales legalization.
Cronos stock has been volatile since mid-August touching a new 52-week high of $15.30 in September, but again falling to $8 level by end of November. The company’s stock price is up above 9% in 2018 but has spiked above 178% in the last 12 months.