VIDEO: Aphria Inc (TSE:APH) CEO Vic Neufeld on “Amateur Hour” Competitors

Aphria Inc (TSE:APH) (OTCMKTS:APHQF) (FRA:10E) CEO Vic Neufeld discusses the Canadian cannabis landscape.  He believes there are 3 key milestones moving forward for all Licensed Producers over the next year and a half.  Aphria is positioning itself for long-term success by leveraging automation and building a reputation based on reliability of product.

TRANSCRIPT:

James West: Hey everybody! Welcome back to Midas Letter Live. Today we have Vic Neufeld, the CEO, founder, co-founder of Aphria Inc. trading on the TSX under the symbol APH. Vic is just getting mic’d up right now so we’re going to start with a look at the Aphria chart.

If you look at that chart, that is healthy by any measure. If you’re looking at the one month window and the thing I want to point out about Aphria is that their shareholders, investors and people watching are generally very responsive to news that comes out. Looking at the whole cannabis universe there’s a lot of companies that put out news, there’s a bit of a rush in the stock and then the stock drops off indicating they’re more traders, they’re not really investors.

[stock_chart symbol=”APH:TSX” range=”1M”]

In the case of Aphria we’re happy to report that when people buy they tend to hold because the chart maintains a strong pattern, unless of course the whole market goes down. Now we’re going to bring in the man of the hour himself- Vic Neufeld.

Vic, thanks for joining me today. How are you doing?

Vic Neufeld: Very good and you?

James West: Good. You’re in town for Lift?

Vic Neufeld: Yes, amongst other things. Leave it at that.

James West: Yeah right so how’s Aphria doing? I hear you’ve launched your super mega mechanical impressive facility that we haven’t been able to see yet but we want to come see it.

Vic Neufeld: The weather’s beautiful for you to drive down or fly down. We’d love to host you and it’s overwhelming.

James West: Yeah.

Vic Neufeld: Absolutely nothing in this industry compares to what the boys in Leamington have built.

James West: For sure, so you’re in impressed too?

Vic Neufeld: Oh yeah.

James West: (Laughter) It sounds like you could get lost in there.

Vic Neufeld: Lost but just like in awe on how automation can really with robotics etc. and stealing the technology of invention from the Dutch, that have scoped this out several years ago, but bringing it to cannabis. The engineering feed behind it, just the overall efficiencies and drilling labor out of the cost equations.

James West: Sure. Okay so which phase is now actively growing?

Vic Neufeld: We’re up to part three, so that’s 300 000 feet and that’s 30 000 kilos of annualized harvest, full crop rotation. In September of this year we’ll have our part four of Aphria One completed and that’s the state of the art automation that you referred to. Health Canada, two months who knows; knock on wood.

James West: Yeah.

Vic Neufeld: We should by mid to end of January of 2019 in full crop rotation, saleable harvest out of the part four and September this year also will be completion of the retro fit of Aphria Diamond. The 1.3 million square feet of brand new Dutch greenhouse built about 4 or 5 miles north of our Aphria One camp in Leamington. That’ll be Health Canada, who knows the time lines and we’re banking on January or February of 2019 for full crop rotation out of there too.

James West: Wow, okay! January/February 2019, what will be the total annual output of Aphria?

Vic Neufeld: Together with Broken Coast our high premium B.C bud, awesome growers they are, we’ll be at 240 000 kilos annually. Give me about four months to get to full crop rotation so by let’s call it May of 2019 we’ll be kicking out 20 000 kilos a month.

James West: Wow!

Vic Neufeld: A month.

James West: That’s incredible.

Vic Neufeld: That’s why automation had to be part of our story because the labor force, what people don’t realize is tremendous unless you bring in automation. We’ve literally cut our F.T.E growth projections in half.

James West: F.T.E?

Vic Neufeld: Full-time equivalence, sorry employees, employees.

James West: Right. Okay so then the main argument for automation besides optimization of floor space is reduction in labor costs?

Vic Neufeld: And speed to market too.

James West: And speed to market.

Vic Neufeld: Absolutely. There’s a lot of efficiencies gain when you don’t have your army of workers going again a million square feet of greenhouse is way down there. If you can save the time where we bring the crops to the processing area and from the cutting stage to veg where we bring the benches from that centralized area out into these greenhouse fields, we’re saving a lot of time. It’s efficiency at the same time.

But it’s more than that. It’s how these tables turn depending on seasonality, sun, time of day. Everything is computerized. The automation, James is beyond belief. I just can’t describe. We’ve had a number of groups now, significant investor institutions flying in to beautiful little Leamington airport by the way.

They walk away with, it’s just unbelievable. Words cannot describe, videos cannot describe. To see it, is to believe it. You have to find your way.

James West: (Laughter) We’re going to come.

Vic Neufeld: You have to.

James West: We’re actually investing in a very high-end drone. We’re talking cinematography style that they use in Hollywood to do car chases and everything because we want to capture some of this stuff.

Vic Neufeld: Awesome.

James West: So then to say that Aphria is locked and loaded and ready for the onset of the recreational market is the epitome of understatements I’m gathering.

Vic Neufeld: I think your viewers need to understand, if I could just offer just a bit here James because you’ve given me a big lob-ball right here.

James West: Okay.

Vic Neufeld: Once the opening bell rings, so I know New Brunswick is talking about August 15th. Our budgets, our 2019 budgets are predicated on October 1. All of our planning in Cap-X, Opx etc. We’re all going to be wrong but how close are we? If on October 1, 2018, the bell rings and it may not be all provinces, I may add at the same time, but for the next 12 months to us there’s three distinct windows of time if you carved up those 12 months.

It’s the time between, for Aphria, between then and the end of January. In that four-month bucket, we are still restricted to the 30 000 annualized kilos plus whatever we are “saving in the vault”. We will have sizeable inventory ready to service all the provincial regulators. It’s January to about June or July where in that period of time our significant ramp up of quality harvest come and low-cost producer status. We will be there to service any provincial regulator that has holes on the shelf.

There’s been a lot of press releases by many, many licensed producers about their abilities to grow; they’re funded, this is their plan, they’re building but now grow it. Grow it without crop failure, grow it to what we call “quality harvest”, that’s both in our definition grams per plant, per square meter and the potency; THC and CBD. Prove it. I can tell you that in January, in that window of time we will be there to really service the underperformance of whatever LPs have failed to live up to their commitments, province by province.

After that, so June, July, August of 2019; it’s our belief that some, not all but some of these licensed producers and their aggressive sound bites on press releases, there will be some more capacity coming on board. It’s that time frame where we believe that the really journey begins. The strong will survive but the weak will not. Between now and then, forced consolidation by way of just survival mode. The price compression will begin by about the fall of 2019 in our opinion. I’ll be challenged by many other CEOs, god love them for their position. I’m giving your viewers my take of what’s going to happen and if you are not absolutely the lowest or close to my lowest cost per gram, whether it’s cash or all in. I’m going to be a participant when SAQ in Quebec or the Liquor Control Board of B.C when they come to us and say: ” Vic, we need price concessions. Well I can tell you our last quarter cash cost us $0.96.

Come January/February 2019 I’ll be below $0.80 cash cost a gram. You can see I’m very very flexible and wanting to be part of what it means to be the go-to LP of choice because I will be there to service their demands.

James West: Once again thanks so much for the input. I’m sure our audience really appreciates it and I certainly do too.

Vic Neufeld: These are great times. Your viewing audience, there’s so much speculation going on and rumored about things. Let me just say the Aphria story has never looked better, ever. I’m very happy.

James West: Well great! Thanks for joining me.

Vic Neufeld: Great, thanks James.

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