Emerald Health Therapeutics (TSXV: EMH) made it known to the public this morning that it has reduced its workforce by approximately 33% since August 1, 2019. The workforce reductions evidently have also included members of the executive team, with Chief Financial Officer Rob Hill and Chief Operating Officer Sean Rathbone also included in the departures.
Emerald Health indicated that the workforce reduction was a necessary evil if the firm wishes to reach profitability in the future, as well as improving cash flow in the near term. The latter is especially important for the firm, with it recently being revealed that Emerald Health currently owes its joint venture partner Pure Sunfarms approximately $7 million in relation to cannabis that it elected not to purchase. Under the agreement currently in place, Emerald is on the hook for what is known as the “price deficiency obligation” – essentially the difference between what Emerald was to contractually pay, and what Pure Sunfarms was able to sell the product for to other customers.
The reductions in Emerald’s workforce is not anticipated to impact its cultivation operations, or that of its client services. However, it is a further sign for the cannabis sector as a whole that initial market expectations were not in line with reality. As a result, firms are having to cut costs wherever possible – and with labour being one of the largest expenses in the sector, it often means that non-essential employees are the first to go when times get tough.
As of the last reporting period, Emerald Health had a cash position of only $2.61 million, while net sales were slightly over $4.6 million for the quarter ended June 30. Meanwhile, expenses came in at $12.4 million, indicating a large deficiency for the operation in terms of cash flow. Emerald as a result will likely have to conduct a raise in the near term to provide further funding. The inability to obtain any sense of profitability in the near term is likely one of the reasons for the departure of CFO Rob Hill, in addition to the issues associated with monies owed to Pure Sunfarms.
Finance director Jenn Hepburn has been designated as the CFO of Emerald Health, effective immediately.
Emerald Health last traded at $0.78 on the TSX Venture.
Information for this briefing was found via Sedar and Emerald Health Therapeutics. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
