Hexo Corp (OTCMKTS: HYYDF) is one of the country’s lowest-cost producers that is rapidly increasing its production capacity in the lead up to the adult-use cannabis market.
The global legal cannabis market is booming! according to a recent report published by Forbes, Brightfield Group projects that the global cannabis market was worth $7.7 billion in the end of 2017, and is projected to reach $31.4 billion by 2021 with the US currently dominating the market. According to a new report from Deloitte the legal recreational cannabis industry could be worth $7 billion annually in Canada by next year.
Hexo Corp (TSX: HEXO) (OTCMKTS: HYYDF) currently operates with over 310,000 sq. ft. of production capacity with construction on another 1,000,000 sq. ft. expansion set to be complete by year end. HEXO will serve the adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand.
HEXO also holds an interest in a 2,004,000 sq. ft. facility in Belleville, Ontario. The building, previously used as a Sears distribution center, will be owned in a joint venture with Olegna Holdings Inc. Initially, HEXO plans to lease up to 500,000 sq. ft. of the space from the joint venture. The proposed use of the building is conditional on the city approving the rezoning application.
HEXO is making progress outside Quebec, the Company recently entered into a supply agreement with the Ontario Cannabis Store. Under the deal, the Company will supply the province with its award-winning Elixir product line, along with its newly launched Fleur de Lune, an intimate cannabis oil. The Elixir product offering includes several formulations such as THC, CBD, or 1:1 in either a peppermint oil or a medium-chain triglyceride (MCT) carrier oil. Elixir and Fleur de Lune are smoke-free, easy-to-use and will be sold in childproof packaging.
On Friday HEXO reported fiscal 2018 fourth quarter results; Revenue for the fourth quarter ended July 31, 2018 increased 64% to $1,410,656 compared to $862,000 in the same period in Fiscal 2017. Higher revenue was driven mainly by increased Elixir and H2 (mid-range line) sales volume, as Elixir was introduced in late Q4’17 and H2 sales volume increased by 70%. Compared to the prior quarter, the sequential revenue increase was 14%, reflecting a higher total of volume sold, primarily driven by a 31% increase in oil sales. For the twelve months ended July 31, 2018, revenue increased 20% to $4,934k compared to $4,097k in the same period in Fiscal 2017. Sales volume increased 33% to 538,886 gram equivalents, compared to 404,158 in the same prior year period.
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Last month Hexo announced the first harvest of plants from its new 250,000 sq. ft. greenhouse. HEXO’s 250,000 sq. ft. greenhouse expansion, together with the manufacturing expansion, brings the Company’s total production space to over 310,000 sq. ft. Construction on the Company’s one million square foot facility is set to be complete by year-end.
The Company also recently signed a contract to manage a warehouse and distribution center for Quebec adult-use webstore orders for the Société québécoise du cannabis (“SQDC”). HEXO and Metro will work together to run the modern 58,000 sq. ft. facility located in Montreal. The facility consists of a warehouse and distribution center, will house product from all the licensed producers who have contracts with the SQDC and will contribute to the creation of 35 new jobs in Quebec.
Over the past quarter HEXO moved towards final preparations for the adult-use cannabis market. With two additional supply deals, this time in Ontario and in British Columbia, the establishment of a joint venture with Molson Coors Canada to develop cannabis-infused non-alcoholic beverages, a first step towards going global.
On October 22 HEXO said Taking its preferred supplier status with the Société québécoise du cannabis (SQDC) and its deals with Ontario and British Columbia seriously, licensed cannabis producer HEXO is proud to not only have delivered on all orders but to have also replenished stock across the country.
HEXO CEO and co-founder Sébastien St-Louis. said “in its 310,000 sq. ft. production facility, HEXO has produced enough of its high quality dried flower, oils, milled flower and pre-rolled cones to meet the initial demand and to send resupply shipments ahead of schedule, ensuring stores and distribution centres have undisrupted access to products. The company reports that it has pulled all stops to meet the demand, shipping several times over the weekend. We’ve been focused on executing all of our plans for several weeks, and I am proud that our team’s dedication and capability has meant that customers’ access to HEXO product has been dependable. Sales have been good, and we’ve been able to keep up. We said we were ready; now we have proved it.”
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Currently trading at a market valuation exceeding $1.5 billion HEXO recently reported revenue for the fourth quarter ended July 31, 2018 increased 64% to $1,410,656 compared to $862,000 in the same period in Fiscal 2017. Hexo is one exciting Company; Hexo currently has over 310,000 sq. ft. of production capacity and construction on another 1,000,000 sq. ft. expansion set to be complete by year end. Hexo holds an interest in a 2,004,000 sq. ft. facility in Belleville, Ontario. HEXO also has a joint venture with Molson Coors Canada to pursue opportunities to develop non-alcoholic, cannabis-infused beverages. We will be updating on HEXO when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with HEXO.
Disclosure: we hold no position in HEXO either long or short and we have not been compensated for this article