Key Takeaways:
- Village Farms achieved a 20% year-over-year increase in consolidated sales, reaching $83.4 million.
- Canadian Cannabis sales rose by 27%, with Village Farms securing the top market share in Quebec.
- Fresh Produce saw a sales increase of 20% and a return to positive adjusted EBITDA.
- International cannabis expansion continued, with 111% growth in exports, particularly to Germany, Australia, and the UK.
- Village Farms remains focused on profitable growth in Canadian Cannabis and international markets.
Village Farms International, Inc. (NASDAQ: VFF) released its financial results for Q3 2024, showcasing robust growth in cannabis and produce segments. The company’s consolidated sales rose 20% from the previous year, driven by its stronghold in the Canadian Cannabis market, improved fresh produce performance, and expanded international cannabis sales.
Canadian Cannabis Continues to Lead Market Growth
Village Farms’ Canadian Cannabis business posted net sales of $36.5 million, marking a 27% increase year-over-year. This growth was propelled by retail branded sales rising 22% and international medicinal sales growing 111%. Adjusted EBITDA for Canadian Cannabis reached $4.8 million, contributing to positive cash flow from operations.
“We continue to capture market share in Canada, particularly with our recent ascent to the number one position in Quebec,” noted Michael DeGiglio, CEO of Village Farms International. “Our goal is to maintain this momentum by managing inventory effectively and targeting profitable growth as international demand increases.”
However, DeGiglio highlighted a slight reduction in gross margin for Canadian Cannabis to 26%, attributed to converting non-branded inventory into cash. Excluding these sales, gross margin was within the company’s target range of 30-40%.
Strong Gains in International Cannabis
International sales were another growth area, with Village Farms reporting a 111% increase in cannabis exports from Canada, serving markets such as Germany, Australia, and the UK. The company’s recent EU-GMP certification renewal supports its expansion efforts, while a new facility in Drachten, Netherlands, has commenced production, set to supply recreational cannabis markets by early 2025.
“Our international business is a key focus, and we anticipate that the Netherlands will be a significant contributor to our profitability,” added DeGiglio.
Village Farms also acquired the remaining equity interest in Leli Holland, which holds one of the Netherlands’ ten recreational cannabis licenses, positioning the company to capitalize on opportunities in the Dutch market.
Fresh Produce Shows Resilience
Village Farms’ Fresh Produce segment posted a 20% increase in sales, recovering from softer pricing in previous quarters. The segment’s adjusted EBITDA reached $2.3 million, and management expects continued improvements through technological advancements and cost-saving measures.
“Produce operations have stabilized, and we’re committed to driving sustained profitability as we integrate new cultivation technologies like artificial intelligence,” said DeGiglio.
U.S. Cannabis Faces Regulatory Challenges
In the U.S., Village Farms’ subsidiary Balanced Health Botanicals recorded sales of $3.9 million, with a gross margin of 63%. However, the proliferation of unregulated hemp-derived products continues to impact the CBD market, prompting regulatory reviews across several states. Additionally, Village Farms is part of the DEA’s pending review regarding marijuana’s federal reclassification, a hearing expected in early 2025.
Village Farms’ application for a Texas medicinal marijuana license is still under review, a move that could bolster its U.S. presence if successful.
Clean Energy Initiatives Add to Profitability
Village Farms Clean Energy began contributing income in April through its Renewable Natural Gas Project in Delta, British Columbia. The project generated $0.3 million in net income during Q3, marking a step forward in the company’s diversification strategy.
Outlook for Fiscal Year 2025
Village Farms expects continued growth in its Canadian Cannabis segment, focusing on profit-driven expansion. The company is also optimistic about its international cannabis business, with the Netherlands projected to become a significant revenue stream by the first quarter of 2025.
“Our international cannabis footprint is expanding, and we’re positioned for a strong fiscal year in 2025 with further opportunities in both cannabis and produce,” said DeGiglio.
Read the entire results here.
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