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Aurora reports steep Q2 loss amid sizable drop in pot production – BNNBloomberg.ca

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It’s time for Aurora Cannabis Inc. to grow up.

After years of spending capital to become one of the world’s biggest cannabis companies, the Edmonton-based pot giant’s interim Chief Executive Officer is using its latest quarterly report to hit the reset button.

Out is the company’s founder and former CEO Terry Booth, along with 500 other staff amid a company-wide effort to cut spending. Aurora also wrote down $1 billion in assets in its second-quarter, while reporting on Thursday an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss that missed analyst expectations due to a sharp decline in cannabis production.

“It really is time to almost grow up and mature as an organization and start delivering … profitability,” interim Aurora Chief Executive Michael Singer told BNN Bloomberg in a phone interview. 

“Once you do that, you’re no longer dependent on the market to fund your operations.”

Aurora isn’t alone in how its business has suffered alongside its cannabis sector peers in a recreational market stymied by supply problems, a stunted rollout of legal retail outlets and a still-thriving illicit market. However, the company says it also overestimated the demand for legal cannabis domestically and in the medical market abroad.

“I would never say we made mistakes. The decisions we made in the past made sense at that time,” Singer said.  “But the market has changed. You have to take a step back and think pragmatically today and think ‘What do we need to do today to adapt for a changing environment?’”

Bruce Campbell compares Hexo, Aurora and Canopy

Bruce Campbell, president and portfolio manager at StoneCastle Investment Management, compares Hexo, Aurora and Canopy.

Singer said the company is now “recalibrating” its expectations of the Canadian cannabis market, launching a new value product dubbed the “Daily Special” aimed at combating the illicit market, while still finding creative ways to drive down costs, such as reducing its directors and officers insurance.  

He added there are no plans to further cut jobs materially, and emphasizes any capital the company intends to spend needs to be “rationalized” and immediately show value.  “The only thing that we have in front of us is our ability to control costs,” he said.

But Singer isn’t ruling out any more major moves – they just need to make sense. He noted Aurora will continue to keep a focus on its entry into the U.S. cannabis market, highlighted by the appointment of Kraft Foods and Mondelēz International Inc. executive Lance Friedmann.

“It is a market that we cannot ignore,” Singer said. “If we look at acquiring something in the U.S., it’s something that has to be federally legal, complement our business, has to be instantly accretive, has to be cash-flow positive and has to add to my balance sheet, not take away from it.”

Investors may be warming to the company’s latest moves. Aurora’s stock rose slightly higher Thursday after the company reported its latest quarterly results, although it has plunged more than 87 per cent since hitting a high of $15.95 in Oct. 2018. The Horizons Marijuana Life Sciences Index ETF has declined by about 66 per cent during that same period.

The positive stock move comes despite a decline in net revenue in the quarter at $56.6 million, down 26 per cent from the prior three-month period, while reporting an adjusted EBITDA loss of $80.2 million, up from $39.7 million in the prior quarter. The company also reported a 26 per cent quarter-over-quarter decline in cannabis production attributed to production changes. Analysts expected Aurora to report $61.7 million in revenue and an EBITDA loss of $62.5 million in the three months ending Dec. 31, according to Bloomberg data.

But analysts remain skeptical Aurora can successfully turn the ship around amid a perilous cash position and reduced access to the company’s credit facility, not to mention a fickle consumer market that is still awaiting the full rollout of so-called Cannabis 2.0 products.

“This (quarter) was a function of the company beginning in their quest to underpromise and overdeliver, something which has been the reverse to date in most of the sector, and will be key going forward if the company are to rebuild trust with investors and the wider market,” said Jefferies LLC analyst Owen Bennett, in a report to clients on Thursday.

Singer appears confident the company will be able to stick around long enough for the cannabis market to rebound back to a level that could reach those original, lofty expectations.

“If we conclude that there’s certain areas that no longer warrant that investment, we’re going to strip those out as well,” he said. 

“We’re going to continue to provide that level of discipline and fiscal responsibility that hasn’t existed before to ensure we have the right size of the business to meet the current market opportunity with an eye on the future.”

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new — and controversial — Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.

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Victoria is the only property market in Canada still flashing high vulnerability – Financial Post

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Victoria is the only real estate market in the country still showing high vulnerability, but the overall risk of a housing crash in the country remains moderate, according to the Canada Mortgage and Housing Corporation.

“The evidence of overvaluation remains low as housing prices remain close to the levels supported by housing market fundamentals,” Bob Dugan, the CMHC’s chief economist told media as the agency released its latest quarterly report Thursday.

The Canadian Real Estate Association’s home price index rose 0.8 per cent in January compared to December, marking its eighth consecutive monthly gain. The benchmark index is now up 5.5 per cent from last year’s lowest point in May, CREA said in a report last week.

Victoria, capital of British Columbia, “continues to show a high degree of overall vulnerability,” but CMHC added that the imbalances are easing.

“Moderate evidence remains for overvaluation, however, declining inflation-adjusted home prices combined with growing personal disposable income and population have further narrowed the imbalances between observed and fundamental prices in the third quarter of 2019.”

Average Victoria home prices rose 1.4 per cent in January to $858,500, compared to the same period last year, according to the Victoria Real Estate Board.

Vancouver, another major real estate market that has seen sky-high prices in recent years, is also showing signs of easing, amid government tightening.

In Toronto price acceleration and overheating indicators are currently below their critical thresholds, but “market activity continues to rise, displayed by the sales-to-new listings ratio trending towards a sellers’ market and the accompanying stronger price growth,” the CMHC said.

In fact, the risks in the Toronto housing market remained moderate for the second quarter in a row, after being consistently classified as high risk for the previous three years. But Dugan cautioned that overheating and price increases remained a concern to watch for.

Earlier this week, the federal government said it is setting up a new benchmark interest rate for determining if people qualify for an insured mortgage using actual borrowing costs rather than advertised rates. Home buyers will need to qualify at the contract rate or a new benchmark based on 5-year fixed insured mortgage rates, plus 2 percentage points in both cases, the government said Tuesday. Those changes come into effect April 6.

Dugan said the corporation is aware of the possible impact of the federal government’s recent changes to mortgage stress tests and is watching the situation closely.

“It’s something that we’ll obviously monitor,” Dugan said. “The adjusted stress test for mortgages remains an important measure to ensure that Canadians, especially first-time home buyers, take on mortgages that they can afford.”

Markets in Quebec and Atlantic Canada were also considered low-risk, but the report said there was some froth on new construction in Montreal and Moncton.

The risk of a housing crash in the Prairies also remains low, CMHC said. Most markets in the three western provinces saw vacancy rates fall or stay flat, said Dugan, easing the regulator’s concerns about a possible oversupply of new construction.

“The rental market vacancy rates remain below critical thresholds,” Dugan said.

The only market in the west where CMHC kept its moderate risk assessment was Regina, where the vacancy rate for rental apartments is 7.8 per cent, a level which raised the CMHC’s concerns about oversupply.

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Police deliver injunction to demonstrators blocking rail tracks in Saint-Lambert – CTV News

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MONTREAL —
Police have served protesters blocking rail tracks south of Montreal, in St-Lambert, with an injunction demanding they dismantle their barricades.

CN police just before 7 p.m. on Thursday approached the barricades with a box full of paper, delivering copies of the injunction to the protesters. Officers said they would give the protesters time to read it. It was unclear as of Thursday evening if police would move in against them.

Longueuil Police had tweeted just before 7 p.m., warning motorists to stay away from the area to allow the demonstrators to leave. 

The protesters, however, showed no signs of leaving.

Canadian National earlier had obtained the injunction to end the blockade of its railway line in Saint-Lambert that had snarled commuter rail traffic to Mont-St-Hilaire and Via Rail service to Quebec City.

Quebec Premier François Legault had said that the barricade would be dismantled by municipal police on the South Shore when the injunction was issued. Longueuil police had asked for the Surete du Quebec’s assistance to remove the barricades, should officers attempt to intervene.

Early Thursday afternoon the protesters were reluctant to speak to the media, though some locals had engaged with them. “I support you, but it’s enough,” St-Lambert resident David Skitt told the protesters, urging them to get off the tracks. After his conversation, where he expressed his frustration with their methods, he shook hands with one of the demonstrators and left.

Temperatures overnight Thursday were predicted to dip as low as -16 C with a windchill of -22 C, according to Environment Canada. The demonstrators had lit a fire inside of a tent and asked their supporters for wood, supplies and blankets.

The blockade of the railway line by supporters of Wet’suwet’en hereditary chiefs has delayed the planned resumption of Via Rail service between Montreal and Quebec City. Service on the busy corridor was set to resume Thursday, but Via Rail announced that the resumption has been postponed until at least the end of the day Friday. The new blockade gave Via Rail “no other option” to push back the resumption of service, the company said in a statement.

Service between Montreal and Ottawa is scheduled to resume Saturday. Service on the complete Windsor-Quebec City corridor is currently expected to resume Sunday.

On Wednesday, Via Rail announced that it was temporarily laying off some 1,000 employees due to the impact of blockades across the country.

Blockades of railway lines across the country have caused widespread passenger and cargo train delays and cancellations.

The blockades are being set up in solidarity with the hereditary chiefs of Wet’suwet’en First Nation of northern British Columbia, who are opposing the construction of a new pipeline through their territory.

– With reporting by The Canadian Press.

This is a developing story that will be updated.

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Asian shares perk up as investors look beyond Apple virus warning – Aljazeera.com

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Asian shares and United States stock futures edged up cautiously on Wednesday, as investors tried to shake off worries about the coronavirus epidemic and look beyond the short-term hit to corporate earnings.

Chinese blue chip shares erased early declines to trade 0.52 percent higher. Australian shares were up 0.29 percent, while Japan‘s Nikkei stock index rose 0.81 percent.

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MSCI’s broadest index of Asia Pacific shares outside Japan spent much of the morning session bouncing between gains and losses, losing 1.08 percent by midday.

China, the world’s second-largest economy, is still struggling to get its manufacturing sector back online after imposing severe travel restrictions to contain a virus that emerged in the central Chinese province of Hubei late last year.

On Tuesday, Apple Inc announced that it was unlikely to meet its sales guidance because of the virus outbreak, spooking investors and denting stock prices.

But investors are optimistic that officials will roll out more stimulus to support the world’s second-largest economy.

“Apple’s announcement was a bit of a shock, but … what’s more important is that central banks are going to provide quite a bit of stimulus,” Stephen Innes, Asia Pacific market strategist at AxiTrader told Al Jazeera.

“We know there’s going to be a slide in earnings, we know those ramifications,” he said, adding that these were expected short-term outcomes, but earnings could recover in the medium to long term. “Central banks will buttress short-term downside with a lot of liquidity.”

The People’s Bank of China cut the interest rate on its medium-term lending facility on Monday, which is expected to pave the way for a reduction in the country’s benchmark loan prime rate on Thursday, as policymakers try to ease the financial strains caused by the virus.

“Part of the thinking that is supporting markets is the actions that China takes to support its economy,” Michael McCarthy, chief market strategist at CMC Markets in Sydney told Reuters. “Any investor concern around impact on demand globally from the virus will be offset by expectations that global central banks will ride to the rescue.”

US stock futures rose 0.18 percent in Asia on Wednesday but the Treasury curve remained inverted as yields on three-month bills traded above those on 10-year notes, in a sign that some investors remain cautious about the outlook.

A yield curve inverts when short-term yields trade above long-term yields, and is often considered a sign of recession in the next year or two.

In the currency market, the euro languished at a three-year low versus the US dollar as disappointing data from Germany, Europe‘s largest economy, has stoked fears that the eurozone is more vulnerable to external shocks than previously thought.

The euro was quoted at $1.0804, still close to its lowest since April 2017.

Mainland China had 1,749 new confirmed cases of coronavirus infections on Tuesday, the country’s National Health Commission said on Wednesday, down from 1,886 cases a day earlier and the lowest since January 29.

The death toll in China has topped more than 2,000 from the flu-like illness which has already spread to 24 other countries.

In China’s onshore market, the yuan briefly fell to a two-week low of 7.0136 per US dollar as traders continued to ponder the economic impact of the virus and the chance for more monetary easing.

The price of US crude oil rose 0.21 percent to $52.16 a barrel, while Brent crude rose 0.12 percent to $57.87 per barrel as a reduction in supply from Libya offset concerns about weaker Chinese demand for commodities.

Expectations that the Organization of the Petroleum Exporting Countries (OPEC) and allied producers including Russia will cut output further should lend support to prices.

The group, known as OPEC+, will meet in Vienna on March 6.

SOURCE:
Al Jazeera and news agencies

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