What to like (and dislike) about Village Farms’ fourth quarter results
International Village Farms (NASDAQ: VFF) has been a monster gainer so far in 2021. Shares of the greenhouse grower have soared 72% year-to-date as of Monday’s market close. But this momentum could have hit a speed bump.
The company announced its fourth quarter and full year results before the market opened on Tuesday, and the cannabis stock slipped 9% in early trading. Here are the highlights from the Village Farms quarterly update.
By the numbers
Village Farms reported fourth-quarter revenue of $47.4 million, a 43% jump year-over-year. This result is well below the consensus analyst estimate of $53.1 million.
The company reported net income of $7 million in the fourth quarter, or $0.12 per share. This reflects a significant improvement from the net loss of $7.2 million, or $0.15 per share, in the prior year period. It also topped analysts’ average estimate for EPS by $0.01.
Village Farms generated a loss of $0.05 per share in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). This compares to an adjusted EBITDA loss of $7.50 for the prior year period.
behind the numbers
Village Farms’ big story in the fourth quarter was its Pure Sunfarms cannabis operation. Village Farms completed the acquisition of Pure Sunfarms in November 2020.
Pure Sunfarms’ gross sales more than doubled year-over-year in the fourth quarter to $22.7 million, and net sales soared 86% to $17.3 million. The company recorded its eighth consecutive quarter of profitability (excluding a $3.3 million non-cash charge related to its acquisition of the remaining stake in Pure Sunfarms). It also achieved its ninth consecutive quarter of positive adjusted EBITDA.
This growth is not surprising given the commercial success of Pure Sunfarms cannabis products. It ranked as the top selling brand among dried flower products at the Ontario Cannabis Store for the fourth quarter and full year of 2020.
But Village Farms still derives more than half of its total revenue from its greenhouse produce business. Fruit and vegetable sales increased by nearly $1.5 million, primarily due to higher tomato prices.
Village farms solid stock market performance in February stems in part from the company’s announcement of the launch of its first cannabis-infused edibles in Canada. Expect solid growth in the Canadian cannabis 2.0 derivatives market this year.
The company plans to start cultivation in its Delta 2 greenhouse in the second half of 2021. This will allow Pure Sunfarms to meet the growing demand for its products.
CEO Michael DeGiglio also said Village Farms expects to significantly advance its international cannabis strategy this year. He added that the company would continue to “select emerging markets with significant long-term potential.”
Despite Village Farms’ mixed fourth-quarter results, its outlook appears to remain strong.
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