Why HEXO’s writedown on ‘cannabis trim’ could be another bad sign for the industry

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What is ’cannabis trim’ and why are pot analysts worried about it?

Quebec licensed producer HEXO Corp. has been forced to write down the value of its inventory of cannabis trim by $2.4 million, another potential warning sign for an industry struggling with oversupply and large producer stockpiles.

Sutton says in general, the ratio of THC in flower to that of trim is 20 to 1 , meaning that it would take 20 times more trim in weight to extract what you would get from flower. Health Canada data shows that as of September 2019, there was 316,000 kilograms of dried cannabis inventory, far surpassing domestic sales figures. It is, however, unclear, how much of that inventory is trim versus flower.

In a recent note to clients, Bank of Montreal cannabis analyst Tamy Chen alluded to this specific issue of an oversupply of cannabis trim, saying that piling trim could further exacerbate inventory impairment issues on the balance sheets of some LPs over the next few quarters — especially those that have already been hit by price declines of dried flower and product returns.

Sutton says one of the biggest problems when assessing Canadian licensed producers is that most of them do not disclose how much trim they are storing, versus flower. “They don’t break it down,” he said.

 

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The steak vs sausage analogy is stupid and self-serving. A pound of steak or a pound of sausage will fill your belly about the same. Not so with trim and bud.

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