Over the past few years, a handful of companies have emerged that had the potential to end up being one of the leaders of the cannabis industry and Aurora Cannabis (TSX:ACB) (NYSE:ACB) was one of them. Aurora stock was one of the most popular cannabis stocks at one point, and many expected it to turn into the leading producer in Canada eventually.
However, that expectation has not come to pass. The reason behind that lies in the range of operational issues at Aurora and a disappointing balance sheet. In recent months, the industry has suffered from oversupply, and Aurora Cannabis responded by pausing the construction of two of its biggest facilities.
The company is giving up many of its assets very cheaply in order to get through this troubling period. Aurora recently announced that it is going to sell its greenhouse in Exeter for only C$17 million. The greenhouse in question had a production capacity of 1,05,000 kilos of cannabis per year when running at full tilt.
Aurora stock is now trading higher by 1.70% at C$1.80.
These steps from the company have cut its annual production capacity by as much as 400,000 kilos. However, beyond the issues with production, it is the company’s balance sheet that has proven to be a source of pain for Aurora.
The company was quite aggressive with its acquisitions, and that meant that Aurora Cannabis often ended up paying over the market rate for companies it acquired. Its acquisition spree began back in August 2019, the pressure of which is now being felt when the industry is in a slowdown.
On top of that, Aurora also had to write down goodwill worth C$762.2 million in the fiscal second quarter, and even after that, there is still C$2.4 billion worth of goodwill left in its balance sheet.
Aurora’s cash position is now in a precarious state, and analysts have already raised concerns over its future. It has cash and equivalents to the tune of C$156.3 million, and the company might not be in a position to take care of all its obligations in 12 months' time.
Aurora stock is one of the worst performers in the cannabis sector this year, with a slump of over 30%.
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