The head of Tilray Brands Inc. says he was pleased with the company’s performance in its latest quarter despite tax challenges in the Canadian cannabis market and legalization hurdles in the U.S.
Irwin Simon, chair and chief executive officer of the cannabis and consumer packaged goods company, told BNN Bloomberg in a Friday interview that Tilray’s second fiscal quarter was “really good,” even as investors were seemingly displeased with the results released earlier in the day.
Shares in Tilray were down more than 12 per cent in afternoon trading on Friday.
“We’re focused on profitability and growth, so I like what we’re doing,” Simon said, noting that Tilray has changed a lot in the years since it was founded solely as a cannabis company.
“We’re diversified, we’re the largest cannabis company in Canada by revenue today, we’re the fifth largest craft brewer in the U.S., and we’re one of the biggest medical cannabis businesses in Europe.”
Tilray reported net quarterly revenue growth of $210 million, a year-over-year increase of 8.7 per cent, but less than the $217 million analysts were expecting. The company said revenue from its cannabis business declined roughly two per cent compared to its second quarter a year ago.
The company’s overall growth was driven primarily by strength in its alcoholic beverage unit, which grew 34 per cent in its latest quarter to $63.1 million, approaching the $65.7 million in revenue it earned from cannabis sales.
Simon said one of the biggest factors impacting the profitability of its Canadian cannabis operation is the existence of excise taxes charged by the federal government.
“In Canada, we’ve got a marketplace there where we’ve got really high excise tax. We pay a dollar (per) gram. The most profitable cannabis company today is the Canadian government,” he said.
“That’s one of the biggest problems in the Canadian market today, it’s how you can make money there because of the cost of excise tax.”
U.S. legalization challenges
As of today, Tilray cannot legally sell cannabis in the U.S., Simon noted, but he said that if that were to change, it would present a massive opportunity for the company, which he said already has a successful business model it can replicate in the world’s biggest cannabis market.
“We have a strong medical business in Canada, we have the products, we have the know-how, we have the formulations for pain, for anxiety and for different other diseases,” he said.
“So, taking all that business and then moving it to the U.S., and we could be in business within 90 days, would be something major for Tilray.”
Simon added that U.S. president-elect Donald Trump has already signalled that his administration will be pro-business and focused on removing certain existing regulations, which could bode well for the cannabis industry, especially when tax implications are considered.
“Think about it; in Canada today, there’s over a billion and a half dollars in excise tax that comes into the Canadian market. Take it to the U.S. and multiply it by 10, there’s $15 billion of excise tax that’s available to the U.S. government that ultimately can be used for a lot,” he said.
“So, I think the Trump administration during their administration time will do something with cannabis, and I think it’s legalizing medical from a federal standpoint, and acting on safe banking and doing a rescheduling, that’s just my opinion and what I think will happen.”
With files from Pete Evans