The company made the announcement Thursday, saying the layoffs were necessary for its long-term stability.
Hexo is one of Canadas largest cannabis companies and a major employer in Masson-Angers, about 40 kilometres northeast of Ottawa.
This has been my hardest day at Hexo Corp., said Sébastien St-Louis, chief executive and co-founder of the company, in a statement. While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO Corp.
The layoffs are across departments and locations and include executives, said the statement. Besides its main plant in Gatineau, Hexo has facilities in Belleville, Montreal, Niagara and Brantford.
Earlier this month, the company announced that revenue for the quarter was lower than expected and withdrew its financial outlook for 2020, which had predicted up to $400 million in net profit.
Hexo began life as Hydropothecary, a Health-Canada approved grower of medical marijuana. Now Hexo also sells recreational cannabis across the country. Its a major supplier to Quebecs government-run shops.
The cuts included the elimination of some executive positions and the departures of chief manufacturing officer Arno Groll and chief marketing officer Nick Davies, the company said in a release.
In its statement, Hexo cited a number of reasons for the layoffs: the delay in opening retail cannabis stores; regulatory uncertainty; pricing pressures; and “jurisdictional decisions to limit the availability and types of cannabis derivative products (that) have contributed to an increased level of unpredictability.
In Ontario and Quebec stores have been slow to open since Canada legalized recreational marijuana a year ago. Customers can buy online, but many prefer to shop in person.
A CBD infused spring water drink called Flow Glow will be sold by Truss Beverage Company, a joint venture between Gatineau cannabis company Hexo and Molson Coors Canada, as soon as Health Canada approves the product, which could be as early as December 2019 source: Truss1017 cannabis jpg
Also in early October, Hexo said its chief financial officer Michael Monahan resigned, effective immediately, after taking on the role in May, citing family reasons.
Many Canadians also continue to buy their weed on the black market, where prices are considerably lower. The latest Statistics Canada survey found that legal cannabis on average was $10.23 per gram, compared to $5.59 per gram on average in the illicit market.
Hexo fought back earlier this month with an announcement it plans to sell a “value brand” called Original Stash for $4.49 a gram.
The province has moved to ban the sale of cannabis-infused sweets and confectionaries. In its financial filings, Hexo said it is developing candies and chocolates.
Health Canada just approved the sale of such edible products, along with cannabis drinks, concentrates like the liquids found in vape pens, and topicals like lotions. Those products are expected to be on sale by the end of the year. However, Quebec wants more restrictive regulations.
The executive departures announced Thursday are the latest changes in the upper ranks of the cannabis company.
Hexo also has a joint partnership with Molson Coors Canada to develop cannabis-infused drinks under the brand Truss. Truss has announced one drink, a CBD-infused spring water, and five more to come under the brand.
This has been my hardest day at HEXO, Sebastien St-Louis, CEO and co-founder, said in a news release.
While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO. The actions taken this week are about rightsizing the organization to the revenue we expect to achieve in 2020.
The cuts include some executive positions, as well as the departures of Arno Groll, chief manufacturing officer, and Nick Davies, chief marketing officer. The company blamed a changing market and regulatory environment for the layoffs.
The delay in retail store openings in our major markets has meant that the access to a majority of the target customers has been limited, the companys news release stated. Regulatory uncertainty across the pan-Canadian system and jurisdictional decisions to limit the availability and types of cannabis derivative products have contributed to an increased level of unpredictability.
The layoffs are the latest development in what has been a turbulent period for the Gatineau-based licenced producer.
Shares were halted on Wednesday ahead of the announcement of plans to raise $70 million through a private placement of convertible debentures led by investors including CEO and co-founder Sebastien St-Louis. The release of fiscal fourth-quarter earnings was delayed four days until Oct. 28.
On Oct. 4, chief financial officer Michael Monahan announced his sudden resignation. Six days later, HEXO pulled its financial guidance for fiscal 2020 and forecast weaker sales due to uncertainties in the marketplace.
HEXO said on Oct. 10 that it expects net sales for the fourth quarter to be between $14.5 million and $16.5 million, and net sales for the year to be approximately $46.5 million to $48.5 million. In June, HEXO reported $13 million in net sales for its fiscal third quarter ended April 20. The company said at the time it was on track to double that figure in Q4 of 2019. HEXO had issued guidance of up to $400 million in net revenue in its 2020 financial year.
In a bid to grab a bigger share of legal cannabis sales in Canada, HEXO revealed a low-cost line of dried flower on Oct. 16 dubbed Original Stash. The 28-gram product costs consumers as much as one dollar less per gram than at the average illegal dispensary.
Toronto-listed shares fell 3.13 per cent to $3.40 at 2:04 p.m. ET. NASDAQ-listed shared declined 3.34 per cent to $2.60.