Village Farms International reports first quarter results

“The start today of commercial-scale cannabis production at the Delta 3 facility is the most significantmilestone for Pure Sunfarms to date,” said Michael DeGiglio, CEO, Village Farms. “And we are thrilled todefinitively move forward with the accelerated production plan, which significantly increases Pure Sunfarmsconservative production targets to as much as 60,000 kilograms or more of dried cannabis through the end of2019. This accelerated plan will enable Pure Sunfarms to more fully capitalize on the expected near-termshortfall of supply when adult use of cannabis is legalized in Canada.”

“In addition, Pure Sunfarms’ first supply agreement provides a strong initial revenue stream, while allowingthe flexibility to pursue opportunities with government purchasers, as well as the significant near-termdemand we are seeing from other licensed producers. With the advantage of Village Farms’ decades ofexperience designing, building and operating large-scale greenhouse facilities and Emerald’s deep cannabisexpertise, I am more than confident in Pure Sunfarms’ ability to steadily ramp up production in the 17 growrooms within the 1.1 million square foot Delta 3 facility and consistently deliver high-quality and fulfilllarge-volume supply commitments.”

“In our produce business, while volumes from our Ontario partners were on target, our first quarter resultswere impacted by lower yields at our Texas facilities, lower volumes from our Mexican supply partner, andslightly lower volumes at our Delta, BC operations, as we have not yet fully replaced the capacity from thetransfer of the Delta 3 facility to Pure Sunfarms. This capacity will be fully replaced by the Fall of thisyear. As a result, we were unable to benefit from favourable spot market pricing as our full production wascommitted to contracted-price retail customers. On the cost side, we experienced an approximately25% increase in pound-for-pound freight costs due to new US regulation as of December requiring freightcompanies to install Electronic Logging Devices. This initial surge in freight costs, which impactedtransportation costs in the US across all industries, have since subsided to single digit year-on-yearincreases.”

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