Emerald Health Therapeutics, Inc. (“Emerald”) (TSXV: EMH; OTCQX:
EMHTF) has provided preliminary, unaudited financial results for
the second quarter of 2019 for its BC-based 50%-owned joint
venture, Pure Sunfarms (PSF). The Company will report its complete
financial results for the second quarter ended June 30, 2019,
after market close on Wednesday, August 28th, 2019, and host
its second quarter 2019 financial results conference call
on Thursday, August 29th, 2019 at 10:30 a.m. ET.
Pure Sunfarms’ sales sequentially increased 125%
to CAD$32 million. Net income, which includes a $20 million net
gain attributable to changes in the valuation of biological assets,
exceeded $34 million, representing a third consecutive quarter of
profitability. EBITDA was $25 million, resulting in an EBITDA
margin of approximately 78%, and net cash flow from operating
activities exceeded $6 million. The operation achieved a gross
margin of approximately 84% before non-cash adjustments to the fair
valuation of inventory and biological assets. All-in production
cost was $0.65 per gram based on increased production volume and
lower seasonal costs (e.g. electricity). PSF sold approximately
8,000 kg of cannabis in the second quarter, and approximately
12,000 kg for the first half of the year.
“The second quarter financial results of our
50%-owned joint venture, Pure Sunfarms, reflects the progression of
our vision and our collective ability to develop a premiere
cannabis operation,” said Dr. Avtar Dhillon, Executive Chairman and
President of Emerald. “We worked closely with our JV partner to
design an ideal operating configuration. With continued
optimization, and expansion underway to double overall output at
Pure Sunfarms to approximately 150,000 kg annually, we anticipate
significant growth in operating cash flow and the value of this
asset to Emerald.”
A key upcoming milestone is the expected
amendment by Health Canada of Pure Sunfarms’ processing license for
the first greenhouse, D3, which will allow Pure Sunfarms to
commence direct sales of packaged cannabis products to provincial
distribution channels. An additional key milestone scheduled to be
reached by year end is completion of the 65,000 square foot
GMP-certified processing center, including extraction. Concurrent
with these steps and the substantial upward scaling of cultivation
in D3, conversion of Pure Sunfarms’ second greenhouse, D2, is
underway, with the first harvest expected in mid-2020.
“Our joint venture, Pure Sunfarms, is setting a
precedent in the Canadian cannabis industry with its pace of
operational scaling, very low-cost production, and impressive
financial results despite reaching full-scale production just part
way through the quarter,” said Riaz Bandali, Chief Executive
Officer of Emerald. “PSF is achieving these results based on its
efficient, large-scale quality production. While exceptional
returns are being generated through bulk sales, we look forward to
PSF obtaining Health Canada’s approval to sell packaged products
directly into provincial sales channels, which will enable PSF to
broaden its business model and customer base.
“Emerald has purchased from PSF a volume of
product sufficient to help meet its requirements for the
recreational and medical market. As we continue to focus on
building a unique product portfolio and scaling up our wholly-owned
cultivation, packaging, and extraction capabilities, we will
leverage our opportunity to purchase up to 40% of Pure Sunfarms’
production at a fixed price, per our agreement, as needed during
the course of 2019. Emerald is excited about the success of the PSF
model and its value as a core investment in Emerald’s portfolio of
operating assets.”
Emerald’s financial results for the second
quarter ended June 30, 2019, which include the financial results of
Pure Sunfarms on an equity basis, are in the final stages of
completion and will be reviewed by the Company’s auditors prior to
release to the public after market close on Wednesday, August 28,
2019. The Company will host a conference call on Thursday, August
29, 2019 at 10:30 a.m. ET.
To access the audio broadcast, please dial (866)
652-5200, or via the Internet at:
https://services.choruscall.com/links/emhtf190530.html.
An archived version of the presentation will be available for 90
days on the "Investors" section of Emerald's website:
https://ir.emeraldhealth.ca/events-and-presentations.
About Emerald Health Therapeutics,
Inc.
Emerald Health Therapeutics, Inc. is a Canadian
licensed producer of cannabis products, with strategic initiatives
focused on differentiated, value-added product development for
medical and adult-use customers supported by novel intellectual
property, large-scale cultivation, extraction, and softgel
encapsulation, as well as unique marketing and distribution
channels. Its 50%-owned Pure Sunfarms operation in British Columbia
has reached its full run-rate annual production of approximately
75,000 kg in its first 1.1 million square foot greenhouse Delta 3
operation; its second 1.1 million square foot greenhouse is planned
to be in full production by the end of 2020. Emerald’s two
wholly-owned facilities in Québec, a high-quality indoor growing
and processing facility, and in British Columbia, an organic
greenhouse and outdoor operation, are completing construction and
are working toward final licensing extension. Emerald has also
contracted for approximately 1,200 acres of hemp annually in 2019
to 2022 with the objective of extracting low-cost CBD. Its team is
highly experienced in life sciences, product development,
large-scale agri-business, and marketing.
Please visit www.emeraldhealth.ca for more information or
contact: Rob Hill, Chief Financial Officer (800) 757 3536 Ext. #
5
Emerald Investor Relations (800) 757 3536 Ext.
#5invest@emeraldhealth.ca
Non-GAAP Financial Measures
This press release contains references to EBITDA
which is not a measure that has any standardized meaning prescribed
by IFRS and is therefore referred to as a “non-GAAP measure”.
Non-GAAP measures used by the Company may not be comparable to
similar measures used by other companies. EBITDA is defined as
“income (loss) before interest expenses, taxes, depreciation,
amortization, foreign exchange losses, and the net impact of
biological asset values on income.
The Company uses this non-GAAP measure because
it provides additional information regarding performance of Pure
Sunfarm’s overall business that is not otherwise reflected under
IFRS.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Cautionary Note Regarding Forward-Looking
Statements: Certain statements made in this press release that are
not historical facts are forward-looking statements and are subject
to important risks, uncertainties and assumptions, both general and
specific, which give rise to the possibility that actual results or
events could differ materially from our expectations expressed in
or implied by such forward-looking statements. Such statements
include obtaining required regulatory approvals; production and
processing capacity of various facilities; expansion of facilities;
obtaining additional cultivation licenses and other permits;
production at various facilities; receipt of hemp deliveries;
entering into of strategic agreements; payments of amounts owed to
and owed by Emerald; transplanting crops; obtaining final municipal
approvals; assessment of cultivation and harvesting techniques;
scale up of reliable, quality low-cost cannabis; and anticipated
production costs.
We cannot guarantee that any forward-looking
statement will materialize, and readers are cautioned not to place
undue reliance on these forward-looking statements. These
forward-looking statements involve risks and uncertainties related
to, among other things, changes of law and regulations; changes of
government; failure to obtain regulatory approvals or permits;
failure to obtain necessary financing; results of production and
sale activities; results of scientific research; regulatory
changes; changes in prices and costs of inputs; demand for labour;
demand for products; failure of counter-parties to perform
contractual obligations; as well as the risk factors described in
the Company’s annual information form and other regulatory filings.
The forward-looking statements contained in this press release
represent our expectations as of the date hereof. Forward-looking
statements are presented for the purpose of providing information
about management's current expectations and plans and allowing
investors and others to obtain a better understanding of our
anticipated operating environment. Readers are cautioned that such
information may not be appropriate for other purposes. The Company
undertakes no obligations to update or revise such statements to
reflect new circumstances or unanticipated events as they occur,
unless required by applicable law.
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