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Valens liquidates its stock of cannabis oils

Published on January 22, 2021 by oz. staff

No company is immune to the peaks and valleys of the cannabis industry.

The Valens Company announced this week it’s taking a strategic hit by liquidating the majority of its cannabis oil inventories at market clearing prices.

That decision has led to a one-time financial statement impact of between $9 and $10 million, which includes the loss from the sale of bulk cannabis oil and their inventory write-down.

Still, Valens expects the move to pave the way for a profitable 2021.

Fresh off a major expansion, the extraction company and white-label product producer says the decision came after it analyzed Canadian cannabis market trends, including:

1. An anticipated increase in outdoor cannabis and a continued overall decline in dried flower prices
2. The success of its value-priced product offerings with partners, and
3. The near-term launch of several new product formats that focus on strain and terpene specific profiles

The company says the strategic move will help it to become one of the lowest-cost cannabis platforms, and it will help drive future growth.

“Looking into 2021, we wanted to clear the deck and increase our flexibility to make a much more aggressive push into the market with new, innovative products, including several exciting opportunities in the Health & Wellness category, at highly competitive prices,” says Valens CEO Tyler Robson.

“Adding low-cost inputs to our already low-cost manufacturing infrastructure makes us tough to beat and will help us secure a cost leadership position in the market. While this decision resulted in a one-time financial statement impact in the quarter, we now enjoy the increased opportunity to capture market share, drive future product margin expansion and generate shareholder value as one of the most flexible, lowest-cost cannabis platforms in the Canadian market focused on 2.0 and 3.0 cannabis derivative products.”

They can now rebuild their inventory with targeted strains of dried cannabis sourced at lower price points and better align their catalogue of strains with their products.

Valens warned investors that their upcoming revenue is lower than some may have expected, in part due to COVID-19 protocols being reintroduced at stores delaying purchase orders.

They expect to report their fiscal 2020 fourth quarter results in late February.