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Aphria Inc. (OTCMKTS:APHQF) On Latest Proposed Federal Tax Plan On Legal Cannabis

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Aphria Inc

Aphria Inc. (OTCMKTS:APHQF) released a statement pertaining the federal government’s announcement on October 3, 2017, pertaining to the proposed excise tax of $1.00 per gram on legal cannabis in Canada.

The details

Vic Neufeld, the CEO of Aphria, reported that the company is supportive of the recent proposed taxation program. While preliminary, they consider it is equitable, fair and hits at the black market for cannabis. Any provincial and federal regulation of recreational cannabis required to remove the black market; to do so sustainably, licensed producers, cannabis suppliers, will require to have an appropriate cost structure in place. With the new proposed excise tax, it’s abundantly evident that keeping costs low will be a major factor for the comprehensive supply chain.

Considering retail price for dried cannabis of $10/gram including HST, the intended excise tax of $1/gram, plus margins of around 30% to 40% needed by retailers, the revenue to approved producers will be $4.5 to $5.5 per gram. Accordingly, it is evident that licensed producers with a cost/gram between $3 and $5 will witness difficulty in offering a sustainable profit margin. They consider this factor alone will have a notable and probably disruptive impact on the cannabis market in Canada.

The CEO of Aphria added that dependent on their reported financials as of May 31, 2017, the company’s cash cost/gram is $0.791, which marks as one of the lowest in the list of Canadian licensed producers. They have long identified the importance of maintaining and establishing a low-cost structure, expecting the recreational taxation and pricing model that is being talked in the present scenario. Aphria has shown since its inception its ability to advance to scale at a low-cost.

Should infused offerings become available via the recreational retail channel, margins as well as pricing will increase. The company has numerous product innovation assignments well ongoing to be one of the first to offer once legislated.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of MMJReporter.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure

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