Zenabis Provides Corporate Update
Vancouver, British Columbia – March 11, 2020 – Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company”) today provided a corporate update on its recent activities.
Kevin Coft, Chief Executive Officer of Zenabis, stated “With our collective efforts, we continue to execute on our plan with a focus to achieve operational excellence as well as become cash flow positive in 2020. Various measures are being taken to ensure continued execution of our plans, which include expanding our exports into the European medical cannabis market and a rationalization of our cost structure.”
Zenabis continues to be focused on achieving operational excellence, becoming cash flow positive and to prudently manage capital allocation decisions driven by market conditions and demand. All of the Company’s construction projects are substantially completed with significant capital investments concluded.
As the company’s focus pivots to operational efficiency and excellence as a consumer packaged goods company, management has conducted a thorough review of all of the company’s operations. This has resulted in departmental restructuring initiatives that are expected to decrease quarterly expenses and cash outlay by approximately $2.0 million. As part of this review, the company is today announcing that it has reduced the workforce at its Vancouver, B.C. head office by 33% and its overall workforce by 22%. This restructuring is expected to have no impact to customer service, production, product development, 2.0 initiatives, retail support or overall operations and is the result of increasing efficiencies.
European Union (“EU”) Export Update
In February 2020, Zenabis received an export license from Health Canada to export cannabis to the EU. With this export license, Zenabis intends to supply pharmaceutical-grade cannabis products to the EU market.
Subject to obtaining the requisite regulatory approvals, Zenabis expects the initial test shipment to its EU partner to occur in March of 2020 and to commence shipping bulk product into the EU market in Q2 2020.
Other Export Markets
Zenabis has received an initial purchase order for bulk dried cannabis from a certified importer located in Israel. Subject to obtaining the requisite regulatory approvals, this order will represent Zenabis’ first export shipment to a non-EU country and is expected to occur in early Q2 2020.
Zenabis believes that the current licensed or substantially completed facilities are sufficient to meet current market demand for the Company’s recreational and medical products and no longer intends on pursuing further construction or conversion projects at this time.
Zenabis Atholville is operating at a steady state. As one of the largest indoor cannabis production facilities in Canada, with 41 flower rooms, the scale and flexibility of Zenabis Atholville allows for large-scale cultivation and production.
In the four months ending January 31, 2020, Zenabis realized, at Zenabis Atholville, an average bud to trim ratio per plant of 4 to 1, with an average of 79% of the total yield per plant being dried flower and an average of 21% of the total yield per plant being trim.
Zenabis continues to ramp-up production in Zenabis Langley in the existing licensed space in order to achieve steady state production. Zenabis believes the current licensed or substantially completed space is sufficient to meet current demand at a competitive cost per gram. The Company expects to have the flexibility to ramp up or down as market demand dictates.
After a Board review of the Zenabis Delta, B.C. facility strategy, the Company has decided to put Zenabis Delta up for sale. The facility has a limited licensed capacity of 100 kg that was non-core for the Company, and the cultivation activities were halted in May 2019. As previously disclosed, Zenabis has relocated a portion of its extractors to Zenabis Atholville since Q3 2019.
Zenabis believes that the Canadian recreational market is positioned for continued growth with additional retail store openings planned for Ontario, Quebec and other provinces such as British Columbia. The legalization of edible and derivative products is also expected to significantly expand the Canadian adult-use recreational market.
Zenabis has initially focused on two product categories for the recently legalized derivative products: vaporizers and beverages. Initial shipments of vape cartridges have been delivered in Q1 2020 and Zenabis continues to fulfill indicative demand for its cannabis concentrates in the form of vaporizing cartridges designed for use in vaporizing devices. Additionally, Zenabis remains on track to launch cannabis-infused beverages in Q2 2020 with its initial launch of cannabis-infused sparkling water beverages. The Company intends to leverage cannabis distillate products from its own extraction laboratory in Zenabis Atholville.
The Company believes that persistent competition from the low-cost illicit market will likely continue to put pressure on wholesale prices and expansion of the legal cannabis market. However, as a result of Zenabis’ low cultivation costs and the ongoing restructuring initiatives, the company believes that it is well-positioned to remain competitive, producing large-scale and high-quality products at a relatively low cost.
Additionally, Zenabis continues to explore and develop new channels to market, including export markets, and is encouraged by early in-roads in this area as described earlier.
Zenabis is a significant Canadian licensed cultivator of medical and recreational cannabis, and a propagator and cultivator of floral and vegetable products. Zenabis employs staff coast-to-coast, across facilities in Atholville, New Brunswick; Delta, Aldergrove, Pitt Meadows and Langley, British Columbia; and Stellarton, Nova Scotia. Zenabis currently has 96,400 kg of licensed cannabis cultivation space across four licensed facilities. Zenabis has 3.5 million square feet of total facility space dedicated to a mix of cannabis production and cultivation and its propagation and floral business.
Zenabis expects its Zenabis Atholville, Zenabis Stellarton and Zenabis Langley facilities to be in steady state production in 2020. The Zenabis brand name is used in the cannabis medical market, the Namaste, Blazery, and Re-Up brand names are used in the cannabis adult-use recreational market, and the True Büch brand name is used for Zenabis’ kombucha products.
Forward Looking Information
This news release contains statements that may constitute “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information may include, among others, statements regarding the future plans, costs, objectives or performance of Zenabis, or the assumptions underlying any of the foregoing. In this news release, words such as “may”, “would”, “could”, “will”, “likely”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate” and similar words and the negative form thereof are used to identify forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the Company’s organizational and strategic review and forecast of demand; the Company’s focus on aligning its resources to meet the needs of consumers; the expected timing and completion of current and planned conversion, expansion and optimization of our facilities, including Zenabis Langley; our plans for Zenabis Delta; the expected submissions of license amendment applications and site evidence packages; the licensing of our facilities and projected timing thereof; our expectations for our extraction projects, equipment and capacity; our expectations for processing output; our expectations regarding our packaging equipment; and the expected content of future operational updates. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. No assurance can be given that any events anticipated by the forward-looking information will transpire or occur. Forward-looking information is based on information available at the time and/or management’s good-faith belief with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond Zenabis’ control. These risks, uncertainties and assumptions include, but are not limited to, those described in the shelf prospectus dated April 9, 2019, a copy of which is available on SEDAR at www.sedar.com and could cause actual events or results to differ materially from those projected in any forward-looking statements. Furthermore, any forward-looking information with respect to available space for cannabis production is subject to the qualification that management of Zenabis may decide not to use all available space for cannabis production, and the assumptions that any construction or conversion would not be cost prohibitive, required permits will be obtained and the labour, materials and equipment necessary to complete such construction or conversion will be available. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Zenabis does not intend, nor undertake any obligation, to update or revise any forward-looking information contained in this news release to reflect subsequent information, events or circumstances or otherwise, except if required by applicable laws
For more information, visit: https://www.zenabis.com.