Earlier this week Aphria Inc. (APHA) announced that its Aphria Diamond growing subsidiary obtained an $80-million credit facility on November 29, 2019 with a Canadian chartered bank. The bank will serve as sole arranger, sole book runner and administrative agent on behalf of lenders.
APHA says that since securing its Health Canada license on November 1, 2019, Aphria Diamond has been quickly ramping up scale. Aphria Diamond plans on being 70 percent planted by mid-week, with 350,000 seedlings planted.
Aphria Diamond is expected to have one of the lowest cost structures in the industry, thanks to the scale of its facility and levels of automation. The company has a target date of March 2020 for its first harvest of dried flower to be sold to provincial control boards.
Aphria Diamond’s assets and Aphria’s balance sheet have secured the credit facility. Pricing is determined by a set margin above the Bank’s Canadian Prime Rate, or by Bankers’ Acceptance with a pricing grid tied to specific financial ratios.
The rate is anticipated to be in the low-to-high 5% annual range. The credit facility has a three-year term containing commonplace financial and restrictive stipulations.
According to Aphria’s interim CEO Irwin Simon: “Aphria has the largest cash balance in the cannabis industry without the dilution of a strategic partner. We are pleased to have secured a term loan that will repatriate a portion of our investment in Aphria Diamond, to be strategically deployed by Aphria.
“This loan strengthens our balance sheet without being dilutive, and positions Aphria Diamond for success as we expand into new categories and growth opportunities in cannabis to enhance value for shareholders long term.”
Aphria does indeed have a solid balance sheet of cash and cash equivalents – to the tune of about $464.3 million. This positions the company not only to survive, but potentially perform quite well if it’s able to build out a solid distribution network within the next year
Aphria is the 3rd largest Canadian cannabis company when measured by production capacity. When factoring in Aphria One, Broken Coast, and Aphria Diamond, the company could produce up to 255,000 kilograms of marijuana annually. And that capacity could generate up to $700 million of sales in fiscal 2020.
Still, most of the company’s performance has been coming from non-operational sources, and Aphria has yet to demonstrate that it can be profitable on cannabis sales alone. Because of this, investors will be looking for a show of stronger operational results in the quarters ahead.
Stay tuned for Aphria’s next earnings report anticipated release date January 14, 2020. Analysts are expecting APHA to post earnings of -$0.01 per share, which would mark no growth from the year-ago period.
Investors may see recent changes in analyst estimates for APHA, but many recent revisions tend to reflect the latest near-term business trends versus the long-term outlook on the company’s business.
Aphria Inc. is a global cannabis company based out of Leamington, Ontario. They’ve curated a reputation for low-cost production of high-quality cannabis at scale, growing it in the most natural conditions possible.
Aphria Inc. (APHA) was trading at $4.67 per share on Thursday morning, down $0.00 (0.00%). Year-to-date, APHA has declined N/A%, versus a 17.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Eric Bowler
Eric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.