Aurora Cannabis: Will This Hemp Stock Surge Post Restructuring?
Trading in Aurora Cannabis Inc (NYSE: ACB)(TSX: ACB) was temporarily halted in the NYSE on June 23, 2020. According to a publication on Seeking Alpha, at the time of trading halt, this hemp stock was up by 4% from its previous day closing price. By the end of the day, the hemp stock’s price dropped nearly by 1% in the Toronto exchange and the New York exchange. NYSE decided to stop all trading of this stock before the company announced a status update on a business transformation plan, originally released in February 2020. The press release with the progress report of this plan was released on June 23, mid-day by Aurora Cannabis. Will This Hemp Stock Surge Post Restructuring?
Aurora Cannabis business transformation
Executive Chairman and Interim CEO of Aurora Cannabis, Michael Singer commented that “Across our organization, we continue to take decisive action and execute on our previously announced Business Transformation Plan”.
Singer continued, “we have achieved our stated SG&A run-rate target and expect to operate at approximately $42 million for the first quarter of fiscal 2021. The core idea of the transformation plan was to strategically realign business functions and withstand any headwinds in the legal marijuana market”. Here are some of the key takeaways from the company’s update:
Aurora Cannabis: Cost Reduction Initiatives
In a bid to contain the SG&A expenses, Aurora Cannabis decided to layoff a portion of its staff. The layoffs included corporate employees and personnel from the production facilities.
The reduction in headcount extended to third-party consultants and professionals also. According to company estimates, almost one-fourth of the company’s SG&A employees were handed the dreaded pink slip.
Aurora plans to reduce up to 30% of production staff over a period of the next two quarters. The release also claims that the recent retirement of President Steve Dobler was part of this initiative.
Aurora Cannabis: Closing Down Production Facilities
Over the next two quarters, Aurora plans to shut down five of its production facilities. These facilities include Aurora Prairie, Aurora Mountain, Aurora Ridge, Aurora Vie, and Aurora Eau.
With this move, the management hopes to stay focused on facilities with a larger production capacity. This move to shutdown units is expected to impact the Income statement with an impairment charge of US$ 60 million in the last quarter of 2020. Even the inventory levels are expected to take a hit to the tune of US$ 140 million, owing to non-cash fair market value adjustments.
Will these measures help this hemp stock surge? We’ll just have to wait and see.
Aurora Cannabis: Will This Hemp Stock Surge Post Restructuring?
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