Cronos Group Stock Pops As 2017 Sales Increase 636%

Cronos Group Inc. (CRON) announced financial results for the fourth quarter and fiscal year ended December 31, 2017, with fourth-quarter sales of $1.6 million, an increase of 274%. Annual sales for fiscal 2017 were $4.1 million, a 636% increase over 2016’s $554,000.

The company also recorded a gross profit for 2017 of $7.2 million versus 2016’s gross profit of $1.9 million. The net income for 2017 was $2.4 million, which was a nice improvement over 2016’s net loss of $1.1 million. The diluted net income per share for 2017 was one cent per share versus 2016’s loss of two cents per share.

“We are building Cronos Group with a focus on the long-term and 2017 set the foundation for the explosive growth we have already started realizing in 2018,” said Mike Gorenstein,” CEO of Cronos Group.  “We are extremely proud of all that our team has accomplished and look forward to a year of rapid increases in sales, commencing distribution in new markets, further developing disruptive intellectual property and launching new iconic brands.”

Beacon Securities analyst Vahan Ajamian said, “Revenue for the quarter was $1.6MM – right in the middle of the implied range previously provided of $1.3-$1.9MM, but below our forecast of $1.8MM and the other analyst’s forecast of $2.0MM.”

Sales increased by $3.5 million, or 636%, to $4.1 million in FY 2017. The average selling price of whole flower is $8.50 per gram and processing costs are estimated to be $0.82 per gram with selling costs estimated to be $0.97 per gram. Cronos strengthened liquidity by $89.6mm, including a $40.0mm senior secured credit facility and $49.6mm in gross proceeds from three common share offerings.

So far in 2018, the company listed on the NASDAQ exchange and announced a joint venture with MedMen in the U.S.

Cronos also put a lot of effort into the rebranding of Peace Naturals with new packaging, a new logo, a revised website, a new shopping portal experience, and new products such as strain-specific oils and limited edition cultivars.

In addition, Cronos launched Peace Naturals strain-specific cannabis oils without using ethanol. In a company statement, Cronos said, “This is important because of the “entourage effect,” or the concept that all cannabis compounds work together synergistically to yield the desired therapeutic effect.”  On January 22, 2018, Peace Naturals received a dealer’s license pursuant to the Narcotic Control Regulations and CDSA from Health Canada for the possession, sale, transportation, and delivery of controlled substances including cannabis, tetrahydrocannabinol and cannabidiol.  The license allows Peace Naturals to export medical cannabis extracts, including concentrated oil and resin products, internationally.

International

The company said that 15% of its sales came from Germany. On the earnings call, the company said that everything was on track for Israel and while there has been market noise about disruptions, they have not experienced any. Cronos launched a strategic joint venture in Israel, with Israeli agricultural collective settlement Kibbutz Gan Shmuel to produce and distribute medical cannabis.The company announced a strategic joint for a venture in Australia for the research, production, manufacture, and distribution of medical cannabis and it owns a 50% equity interest in Cronos Australia.

Stock Performance

There are currently three analysts covering the company according to Yahoo Finance with an average price target of C$7.85 for the stock trading on the Toronto Exchange. That stock is currently trading at C$8.88. The stock on the NASDAQ exchange was lately trading at $7.14, down from its 52-week high of $10.39, but higher than its year low of $5.12.