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Hexo shuts down 3 facilities, lays off 155 staff

Hexo is shutting down 3 of its facilities, laying off more than 150 staff

The announcement came only a couple of weeks after founder and former CEO Sebastien St-Louis was ousted allegedly after a shareholder expressed utter dissatisfaction with the company’s recent performance. 

Hexo shared in a corporate update yesterday that they are decommissioning three facilities: 

  • Kirkland Lake, Ontario;
  • Brantford, Ontario;
  • Stellarton, Nova Scotia.

These facilities were acquired by Hexo with the acquisition of Zenabis and 48th North. The Stellarton facility, indeed, was bought with the acquisition of Zenabis for CA$235 million in February. On the other hand, the Kirkland Lake and Brantford facilities were both owned by 48th North and were then added to Hexo’s asset portfolio through the company acquisition for CA$50 million in February. These two were the only facilities of 48th North, which means that Hexo only bought a bunch of brands and IPs. 

"As part of the integration planning process, we completed a comprehensive evaluation of all HEXO facilities to review their capabilities, capacity, and efficiency, and made the decision to centralize operations at our core facilities,” said Scott Cooper, president, and CEO of Hexo, in a company’s statement. 

As a consequence of the shutting down, some 155 employees are being laid off. The company has said that they are working with employees to reduce the impact of this decision. “This includes relocating employees who take on roles at one of Hexo’s core facilities and supporting those who are not able to relocate with their employment search,” they said. 

Last week, Hexo's auditor raised substantial doubts about the company's future. "The company has suffered recurring losses from operations, has had cash outflows from operating activities, and has financial liabilities that may require significant cash outflows over the next twelve months," the auditor wrote in a six-page report filed along with Hexo's fourth-quarter earnings.

It also noted that Hexo's existing funds and operational cash flow are "not sufficient" enough to fund debt repayments, capex budgets, and potential cash requirements under a senior convertible note. The auditor's report comes as Hexo is trying to quell the upheaval stemming from a recent strategic reorganization that involved the departure of co-founder and chief executive Sebastien St-Louis and chief operating officer Donald Courtney last week.