According to parent company Village Farms International’s newest quarterly report, net sales for Pure Sunfarms and Rose LifeScience increased in the last three months of 2023.
While Pure Sunfarms (PSF) is the wholly-owned Canadian subsidiary of Village Farms, the company also owns 70% of Québec-based Rose LifeScience.
Net sales increased 14% from $38.2 million in the same quarter in 2022 to $43.6 million in Q4 2023, while retail branded sales increased 5%, international (export) sales decreased 66%, and non-branded (wholesale) sales increased 339%.
The cost of sales also declined from $27.8 million in the same quarter in 2022 to $25.2 million in Q4 2023.
Despite this increase in net sales, the company still reported a $1 million loss after expenses for its cannabis operations in Canada. This is a decrease from a net loss of $3.8 million in Q4 2022. The company reported $22.2 million in excise taxes in Q4 2023 and $78.3 million for the year ending December 31, 2023, on sales of $232 million, an effective rate of nearly 34%.
For the year ended December 31, 2023, Village Farms’ Canadian cannabis operations saw $154 million in sales and a net income of $4 million. The company reported $109 million in net sales and a net profit of $200,000 in the previous year.
Village Farms’ US cannabis venture, Balanced Health Botanicals, saw net sales of $5.1 million compared with $5.3 million in Q4 2022 and a net loss of $13.7 million compared to $20.9 million in Q4 2022.
For Q4 2023, retail branded sales were $56.1 million of total sales, while international sales were $1.1 million. Non-branded sales accounted for another $7.9 million.
Michael DeGiglio, President and Chief Executive Officer of Village Farms, says the Canadian market is slowly rebounding from excess supply and record low prices, and he expresses optimism at the possibility of future excise tax reform.
“Our Canadian Cannabis business remains the undisputed leader in that market, with record sales and another quarter of positive adjusted EBITDA and cash flow in the fourth quarter,” said DeGiglio.
“We reclaimed the number two national market share rank across all categories and are steadily closing the gap on the top position. Record retail branded sales were complemented by another especially strong quarter for non-branded wholesale sales. In our non-branded wholesale channel, we took advantage of improved supply conditions and pricing created by the shift of many of our peers to asset light models, significantly reducing our non-brand-spec inventory. While these close out sales are temporarily affecting gross margin and adjusted EBITDA, they are generating additional cash flow, and will support more efficient, higher cash conversion inventory turnover this year and beyond.”
Village Farms is also the only North American cannabis company with a production facility in the Netherlands as part of the country’s early pilot-project approach to regulating cannabis supply for its cannabis “coffee shops”. Production is expected to begin later this year, with its first sales in 2025.
It is also exporting cannabis from its Canadian production to markets in Europe and Australia. Nine of the company’s cultivars in Canada are now being sold across four international medical markets. The Company has a strategy in place to accelerate international export sales in current markets while expecting to launch products in additional European markets this year.
In addition to their US cannabis venture, Village Farms is also preparing for the potential for full legalization in the US through its connection to one of the largest greenhouse operations in the country (more than 5.5 million square feet in West Texas), as well as the operational and product expertise gained through Pure Sunfarms’ cannabis success in Canada.
“On the international front,” adds DeGiglio, “earlier this year we started the build out of our first production facility in the Netherlands, where we are proud to be the only North American participant in the first legal recreational cannabis market in a major European country. Production is targeted to begin later this year. We expanded our export program for the European medical market to the United Kingdom, with additional markets expected to be added this year. Notably, recent positive progress around German medical use regulation provides us with additional opportunities going forward as the market grows.”
