Aurora Cannabis Layoffs Continue In Effort To Improve Balance Sheet
The Canadian cannabis giant revealed this week that it had to close activities at its Aurora Sun facility and opted to reduce the production at its flagship Aurora Sky facility by 75%.
Per Marijuana Business Daily, Aurora's reducing production to 25% at Aurora Sky led to the company terminating around 200 employees.
This move comes just two weeks after Aurora announced halting operations at one of its facilities in Alberta, which resulted in about 30 layoffs.
In June, Aurora laid off 700 workers and disclosed plans to shut activities at several facilities, including those in Saskatchewan, Ontario, Alberta and Quebec.
Aurora started to reduce its workforce even earlier this year when in February cut around 340 jobs.
The reduction at Aurora Sky signals serious challenges Aurora has been facing, as the company has spent many years and the minimum CA$150 million ($120 million) for the construction of the facility, while initially it was projected to cost CA$110 million, writes Marijuana Business Daily.
At that time, the company’s leadership team noted that they project “a full payback on this project in a very short number of months” once it hits full production, whereas, the company lost billions of dollars since then, reports the outlet.
Amending Credit Facility Terms, Postponing Positive Adjusted EBITDA Predictions
Aurora also shared it has entered into an agreement in relation to a second amended and restated credit facility with its lenders. The new agreement enables it to modify the facility to a minimum liquidity covenant rather than a minimum EBITDA covenant, while also prolonging the maturity to Dec. 31, 2022.
No changes were made to the investment amounts under the facility which remain at $101.2 million (under the term loan) and $15 million (under the revolver).
Aurora further explained that the agreement was established to support its “back to basics” controlled consumer packaged goods strategy, which will postpone the company’s capacity to reach positive adjusted EBITDA. Nevertheless, Aurora dares say the strategy will enable it to further develop and reach profitability.
The management relies on the company’s $450 million in cash on hand to support the strategy.
"Our substantial liquidity position has enabled us to revise our credit facility terms by extending maturity and transitioning us from a minimum EBITDA covenant to a minimum liquidity covenant, thereby providing us with the financial flexibility we need to execute our business transformation plan,” Aurora CEO Miguel Martin stated. “We are already seeing progress with improving cashflow and product successes such as the recent relaunch of our vapour portfolio. We are also driving our consumer strategy that will serve as a foundation for sustainable revenue growth and profitability over the long-term."
Aurora is also moving to a "variable cost structure in cultivation" by expanding its network of external supply and responsibly scaling back production from its fixed asset network, Martin explained.
"Specifically, in November we closed our Aurora Sun facility and are now scaling back production at Aurora Sky to 25% of its previous capacity," he added. "At this level of production, we intend to transform the Sky facility into a high-value cultivation center for our premium strains, and in turn, better align production with current demand for premium flower."
Separately, MBD reported that Aurora Chief Science Officer Jonathan Page is leaving the company on Dec. 18 by his choice, but will remain with Aurora as a consultant.
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