Canopy Growth lands creditor protection for BioSteel business, intends to sell brand | Canada News Media
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Canopy Growth lands creditor protection for BioSteel business, intends to sell brand

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Tired of its sports drink business weighing on its books, Canopy Growth Corp. is making moves to shed the division.

The Smiths Falls, Ont., cannabis company announced Thursday that it had obtained creditor protection from the Ontario Superior Court of Justice for BioSteel Sports Nutrition Inc. and intends to seek permission to sell the business.

Canopy sought creditor protection because it said it no longer has access to funding. It described BioSteel as a “significant drag” on its profitability and cash flow, saying about 60 per cent of the company’s adjusted EBITDA loss was attributable to BioSteel.

Canopy chief executive David Klein said the moves were a “major milestone.”

“While BioSteel’s business has shown significant year-over-year revenue growth, and we believe the brand remains an attractive asset, it does not align with Canopy Growth’s cannabis focused asset-light strategy,” he said in a news release.

“We have repeatedly demonstrated that we will take decisive action to enhance our profitability and ensure we are focused and positioned to be a leader in the North American cannabis sector.”

BioSteel’s creditor protection status marks another blow for the beverage company Canopy scooped up a 72 per cent stake in back in October 2019 in a bid to diversify. The deal came with a pathway to 100 per cent ownership.

BioSteel was started by entrepreneur John Celenza and hockey star Michael Cammalleri in Toronto in 2009 and quickly became ubiquitous on arena and sports field benches through partnerships with the Toronto Raptors, the Toronto Blue Jays, the National Hockey League and the U.S. Soccer Federation.

But those relationships were costly.

Canopy reported that advertising and promotional investments in BioSteel, including costs related to its NHL sponsorship, had increased by about $12 million in its most recent quarter.

And in recent months, Canopy and one of its subsidiaries advanced about $15 million per month and more than $366 million to date to BioSteel to keep the company going, BioSteel said in court documents.

BioSteel also encountered accounting problems.

Canopy promised in May to refile three of its past quarterly financial statements because of misstatements linked to BioSteel it warned “should no longer be relied upon.” It parted ways with some BioSteel staff and made management changes by June.

But by September, Canopy concluded it had had enough of BioSteel’s financial situation and told BioSteel it would no longer make cash advancements. Court documents say a “broad marketing process” led by Goldman Sachs & Co. in late 2022 to find additional investors or sell BioSteel did not result in any bids.

“Goldman engaged with 24 potential buyers, however, the feedback from potential buyers noted, among other concerns, that significant investment would be required and that the timeline for a return on the investment in BioSteel’s current form was too long,” BioSteel lawyer Sarah Eskandari said in an affidavit.

A special committee then tried to solicit interest and six parties came forward, but they sought “lengthy due diligence periods and/or financing conditions, and no party offered committed financing to fund the operations of the BioSteel business during its diligence period.”

One of BioSteel’s co-founders left all director and officer positions they held with the business on Aug. 18 to form “part of a potential bidding consortium,” court filings say. That person was the last employee of BioSteel Canada, though 190 were still in the U.S. with 90 at a Verona, Va., facility and the remaining in sales, marketing and other corporate roles.

The company laid off 68 employees Thursday, Canopy’s chief communications officer Brenna Eller said.

Canopy’s Canadian creditor protection in conjunction with a Chapter 15 case it intends to launch to address its American assets will limit Canopy’s further funding obligations from BioSteel.

“Canopy Growth’s financial position is expected to be further strengthened through the immediate removal of the cash expenditures associated with funding the BioSteel business unit and the potential cash proceeds from the orderly sale of BioSteel’s assets,” Canopy said in a news release announcing the changes.

Investors appeared pleased with the news, pushing the company’s share price up by 26 cents, or almost 17 per cent, to $1.82 in mid-morning trading, but by the market’s close, it was up 14 cents, or 8.97 per cent, to $1.70.

Canopy hopes its move away from BioSteel will complement the parent company’s efforts over the last few years to streamline its business through layoffs, facility closures and a more detailed look at expenses.

When it sells the historic Hershey Drive in Smiths Falls for $53 million back to the chocolate company that once owned the building, Canopy will have sold seven properties for an aggregate gross amount of about $155 million since April 1.

Canopy has also reduced its overall debt by $349 million since the start of July and expects another $95 million in reductions over the next two quarters.

This report by The Canadian Press was first published Sept. 14, 2023.

 

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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