Golden Leaf Holdings Ltd (OTCMKTS:GLDFF) To Suffer Setback Owing To Lower Supply In Region

November 29, 2016 - By Hazel Jackson

Golden Leaf Holdings Ltd (OTCMKTS:GLDFF) continued with its upward trend in the stock market, during the November 28 trading session, as the stock posted a gain of 8.79%. The stock is currently trading at $0.36 per share, after having had a trade volume of 219,796. Much of the gains from yesterday’s session, were a result of the company filing its financial report for the 3Q2016. It is expected that GLDFF would continue with this upward trend, for the short-term, but would need do much more to sustain long-term gains.

For its 3Q2016, the company recorded a decline of 11% in revenues, on a year-over-year basis, while operating expenses reduced by 46%. Golden Leaf announced that this was a result of improved efficiency and streamlining of operations. The net loss for the 3Q2016 came at $1.4 million, $0.4 million lower than the preceding year. The management noted that it has begun responding to on-ground changes, in the state of Oregon, as the cannabis market in the region becomes more mature. GLDFF believes that the growing stringent requirements and mandated lab testing is an indication of the rapid evolution of the market, as has been seen in Colorado. As such, current hurdles with product availability are only temporary and it is expected that rapid growth in the region would once again start next year.

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In addition to this, GLDFF also revealed that there were a few factors that would affect the 4Q2016 supply. This includes the change in packaging requirements in Oregon, due to which dispensaries are purchasing lower than expected inventory, in anticipation that the regulations might change again. Moreover, the laboratory testing requirements in the state has resulted in the quarantine of crops, from a number of growers, creating a large shortage. Finally, a large crop area has also been damaged, due to severe weather conditions, particularly the typhoon Songda. As such, dispensaries are expected to report a 50% decline in sales of cannabis products, at the end of the 4Q2016.

Don Robinson, Golden Leaf CEO, commented, “During the third quarter of this year, our revenues were impacted by cash constraints, which affected our ability to purchase raw materials and fully utilize our manufacturing capabilities which resulted in limited product supply. However, because we had previously implemented cost-cutting initiatives to reduce our operating expenses, the impact to our bottom line was reduced. With the recently announced CAD$12 million capital raise, we are well capitalized to move into a period of renewed growth which is anticipated in the new year.”

Golden Leaf is one of the largest cannabis oil producers in North America, based in Oregon. As such, the company is expected to record a significant decline in earnings, during the 4Q2016, owing to lower supply. However, if GLDFF is successful in securing a high-level supply of cannabis from elsewhere, it could significantly improve the chances of the company to further improve its financial position, by the end of this year.

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