Village Farms JV Now Allowed to Sell Recreational Cannabis

A Village Farms International (TSX:VFF,NASDAQ:VFF) joint venture is continuing to establish itself in the Canadian cannabis industry.

On Tuesday (September 10), Pure Sunfarms, the 50 percent owned joint venture of the British Columbia-based (BC) produce company, announced it secured an amendment for a Health Canada license, which will immediately allow it to sell branded dried cannabis directly to provincial distributors and private retailers.

Pure Sunfarms holds supply agreements with the regulatory bodies for cannabis sales. In Ontario, this is the Ontario Cannabis Store, and in BC, the British Columbia Liquor Distribution Branch.

Since cannabis was legalized for recreational consumption in October last year in Canada, Ontario had C$121 million in marijuana sales while BC had C$19.5 million as of June of this year, according to data from Statistics Canada.

Village Farms touts Pure Sunfarms as a low-cost producer offering quality cannabis products.

The company’s 2019 Q2 results reported earnings of US$9.9 million, including net income from Pure Sunfarms at US$14 million for Village Farms’ share.

Sales of cannabis sold mainly to other licensed producers increased 125 percent in Q2, the company said, bringing in C$32.4 million. It was the third consecutive quarter of profitability for the cannabis producer.

Pure Sunfarms received a license from Health Canada in May to allow one of its facilities in Delta, BC, to extract and process cannabis, enabling it to manufacture products including cannabis oil, concentrates and edibles.

Edible and infused cannabis products are set to become legal for sale later this year. Health Canada has indicated sales of these anticipated items will not start until mid-December.

Pure Sunfarms CEO Mandesh Dosanjh said in a statement the company would begin rolling out its products to regulatory bodies in the coming weeks.

Shares for Village Farms have largely managed to maintain their value in a summer that’s seen other players in the marijuana space slump significantly.

Despite a slow summer for the cannabis stock market, fueled by the industry scandal of CannTrust Holdings (NYSE:CTST,TSX:TRST) illegally growing cannabis in unlicensed rooms and the firing of former Canopy Growth (NYSE:CGC,TSX:WEED) CEO Bruce Linton, Village Farms has seen a strong performance this year.

So far in 2019, shares of the firm in Toronto have jumped over 220 percent in value.

Village Farm shares in Toronto opened at C$15.48 and rose, as of 3:10 pm EDT, to C$15.87, representing a surge in value of 2.52 percent for the day.

Michael DeGiglio, CEO of Village Farms International, said the license amendment follows Pure Sunfarms greenhouse reaching a full production rate of 75,000 kilograms in July.

DeGiglio added that Pure Sunfarms is expected to reach a minimum production capacity of 150,000 kilograms of cannabis per year in 2020.

Pure Sunfarms will continue to engage other provincial cannabis distributors in Canada to sign more supply agreements, according to the company.

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.