Cronos Group announced an expansion of Cronos Growing Company, a cannabis cultivation company half owned by Cronos. The investment will be funded by an additional credit facility provided by Cronos and is intended to assist GrowCo’s expansion of its cannabis facility to address the increased global market demand for cannabis flower.
Key Highlights of the Investment:
Investment in Expansion: Cronos will provide an approximately $51 million ($70 million CAD) secured non-revolving credit facility to GrowCo to fund facility expansion, enabling growth opportunities in the markets Cronos operates in today as well as enabling future growth into new markets that open.
Enhanced Governance: On July 1, 2024, the GrowCo board of directors will expand to five members, three of whom will be appointed by Cronos.
New Supply Agreement: Cronos will have the option to purchase up to 70% of the total production from the expanded facility.
Financial Consolidation: Cronos will be consolidating the joint venture’s results in its financial statements beginning in the third quarter of 2024.
GrowCo has demonstrated cultivation performance, contributing significantly to Cronos’ portfolio. In 2023 Cronos purchased approximately $21 million of biomass from GrowCo, and GrowCo sold approximately $20 million to third parties. GrowCo has strong gross margins that the Company expects to be accretive on a consolidated basis and delivered positive net income and positive cash flow in 2023. The expansion will aid its ability to supply markets Cronos operates in, which include Canada, Israel, Germany, the United Kingdom, and Australia, while also fueling the potential for international expansion.
