Canopy Growth to cut more costs after smaller-than-expected loss

Canopy Growth on Friday reported a smaller-than-expected loss in the third quarter, as the Canadian pot producer kept a tight lid on costs amid growing investor pressure to turn in a profit.

U.S.-listed shares of the company rose over 15% in premarket trading.

Late last year, major shareholder Constellation Brands’ finance head David Klein took the helm at Canopy, months after Constellation expressed its disappointment over heavy losses the pot producer reported in 2018.

More than a year after Canada’s legalization of recreational weed, most producers have failed to show profits because of fewer-than-expected retail stores and slow overseas growth leading to oversupply.

To pacify investors impatient for profits, Canopy and its rivals started the year by announcing a wide range of cost reductions. Last week, Aurora cut 500 jobs and took a writedown of as much as C$1 billion ($754.83 million). Tilray cut 10% or about 140 jobs.

“Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have started to implement tighter cost controls across the organization,” Canopy’s Chief Financial Officer Mike Lee said in a statement on Friday.

“We plan to take further steps to reduce our costs and right-size our business,” Lee added.

Excluding items, Canopy’s loss of 35 Canadian cents per share in the third quarter ended Dec. 31 was smaller than the average analyst estimate of 49 Canadian cents.

Canopy said its total operating expenses decreased 14% from the second-quarter, primarily due to lower general and administrative expenses and stock-based compensation.