Village Farms International: Majority Owner Of A Great Cannabis Company, But Doubts Remain

  • Pure Sunfarms is a very successful cannabis business, with terrific gross margins and very low operating costs.
  • Prior to 2018, the company had generated positive operating cash flow for at least the past decade and was usually generating positive free cash flow as well.
  • Since around mid-2017, Village Farms has been spending more money than it has brought in from the vegetable business, including an operating cash flow deficit in 2018 and a larger operating cash flow deficit over the twelve months ending on September 30, 2019.
  • Perhaps due to these changing business conditions, Village Farms decided to use some of its Canadian greenhouse capacity to grow cannabis rather than vegetables.
  • As with Village Farms, Pure Sunfarms has very low operating costs, especially compared with the other publicly traded Canadian cannabis companies.
  • Pure Sunfarms has been profitable for each of the first three quarters of 2019 owing to its low growing costs and its low operating costs.

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