Cronos announces more than 100m USD in losses

Although Cronos Group Inc. holds one of the richest cash positions in the Canadian cannabis industry, Cronos Group Inc. (Nasdaq and TSX: CRON) continued to disappoint investors with poor quarterly sales, steep losses and impairments. The Ontario maker on Thursday reported a net loss of $ 107 million for the second quarter ended June 30th on net income of $ 9.9 million. Cronos' shares are down nearly 20 percent since Thursday morning, and they're down 75 percent since Marlboro cigarette maker Altria invested $ 2.4 billion in the company in March 2019. CEO Mike Gorenstein preached patience on a earnings call with analysts Thursday morning as the company remains focused on its long-term strategy amid "unprecedented shifts" in the legal weed sector and the global economy. "In these extraordinary times, it is very encouraging to see that we are making progress on our strategy in our global presence," said Gorenstein. While the company failed its US CBD strategy with the Covid-19 pandemic and continues to grapple with low Canadian weed sales and a myriad of lawsuits, the future continues to be bright for Gorenstein as Cronos expands into the Israeli market and itself focused on developing rare cannabinoids for commercialization. During the quarter, Cronos took a $ 40 million impairment loss related to a revaluation of its US CBD brand, Lord Jones, and a non-cash charge of $ 35.9 million related to Altria's investment . Lord Jones reported revenue was unchanged at $ 2.2 million for the second quarter, after falling 20 percent in the previous quarter. Cronos said earlier in the year that they would be happy to expand their CBD business in the United States, but the coronavirus has continued to keep many brick and mortar stores closed since mid-March, hampering sales and demand in the process. CFO Jerry Barbato told analysts that with the looming second wave of closings and declining visitor numbers in some reopened stores, it is difficult to predict what the rest of 2020 will bring. CIBC analyst Seth Rubin asked executives how they are adjusting to the new normal. "Are there any signs that you can make up for the brick and mortar losses through online channels, either through direct sales or through online retailers? Gorenstein said the company responded with a marketing flash, new mass-produced items, and high discounts offered direct to online consumers to offset lost sales at its 900 retail partners. Lord Jones CEO Robert Rosenheck resigned last month, and Cronos hired former Altria chairman Summer Frein to lead the CBD business. The company said it hopes the U.S. federal government will provide regulatory clarity for the CBD area, which will help Lord Jones with new product development. "We are convinced of the plans that the company must correct the development of this business and we are very excited to see what Summer Frein will do to move the company forward," said the managing director.