Canopy Growth (NYSE:CGC) is turning off the lights in a pair of its facilities in Canada. The company announced after market hours Wednesday that it is shuttering the greenhouses, both located in the western province of British Columbia, in a move that will eliminate roughly 500 jobs.
Canopy Growth, a top cannabis grower, is also scrapping plans to develop another greenhouse in Niagara-on-the-Lake, Ontario.
The company said it's likely to book pre-tax charges of $700 million Canadian ($524 million) to $CA800 million ($599 million) in its current quarter on these shutdowns.
The two greenhouses being closed cover around 3 million square feet of space licensed for cannabis production. Both came on stream in February 2018. Canopy Growth said it made the decision to shut them after an organizational strategic review of forecast demand for cannabis versus production capacity.
"Nearly 17 months after the creation of the legal adult-use market, the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry," the company said in its press release announcing the closures. "Additionally, federal regulations permitting outdoor cultivation were introduced after the company made significant investments in greenhouse production."
The company pointed out that it currently has an outdoor site which is more cost-effective than greenhouses.
Although Canopy Growth pleased investors with a better-than-expected Q3 of fiscal 2019 and has a significant cash position, it is still well in the red on the bottom line.
Canopy Growth, one of the highest-profile marijuana stocks on the market, was down slightly in after-hours trading following Wednesday's announcement.