Clever Leaves fires 63 people and leaves Portugal

Clever Leaves announced today that it will abandon its operations in Portugal, having proceeded with the collective dismissal of 63 workers. According to Press release, the company will concentrate all cannabinoid cultivation and production operations in Colombia to leverage existing operational efficiencies. Clever Leaves expects the operational transition to generate approximately $7 million in cost savings by the end of 2023.

Clever Leaves Holdings Inc. is listed on the Nasdaq stock exchange (CLVR, CLVRW) and is a multinational production company licensed to operate in Portugal since 2020 and had received EU-GMP certification do Infarmed IP for the manufacture of dried cannabis flower as API (Active Pharmaceutical Ingredient) and finished product last November 2022. The company now announces the closure of all operations in Portugal, as part of its ongoing restructuring initiatives. In line with this restructuring plan, Clever Leaves expects flower cultivation in Portugal, post-harvest processes and manufacturing activities to cease completely by the end of the first quarter of 2023.

“By exclusively growing and producing our cannabinoid products in Colombia, we intend to leverage our existing cost efficiencies in the country as we grow our dried flower supply,” said Andres Fajardo, CEO of Clever Leaves. “We believe this transition will allow us to optimize our production infrastructure and increase cost savings, positioning us to more effectively compete in the global medical cannabis market. While our decision was extremely difficult, we believe it is in the best interest of the company as it positions us more effectively to meet our customers' needs. In addition, we plan to incorporate the substantial learnings from our work in Portugal to increase the success of our operations in Colombia”, said the CEO.

“This next phase of our restructuring work builds on the progress we have made with improving our cost structure and capital efficiency throughout 2022. We look forward to building on our sustainable competitive advantages in Colombia and making further progress in 2023 as a multinational leaner and more agile operator.”

Clever Leaves obtained a license from Infarmed to operate in Portugal in August 2020.

Clever Leaves restructuring costs

On January 17, 2023, Clever Leaves' board of directors authorized a restructuring plan designed to improve operating margin and support the company's growth, scale and profitability objectives. In conjunction with its restructuring and liquidation plan in Portugal, the company announced the collective redundancy of 63 employees associated with its Portuguese operations. Clever Leaves expects to incur total charges of approximately USD 19 to 21 million in the fourth quarter of 2022, related to its operational closure in Portugal, including the following expenses:

• Approximately 0,7 to 0,9 million related to employee compensation and benefits;
• Around 12 million 13 million related to property and equipment exit costs, consisting of lease depreciation, as well as property and equipment abandonment charges;
• Between 6 and 7 million dollars related to the disposal of stock that will not be sold.

Of the above $19-21 million in estimated charges, approximately $1,5-2,0 million is expected to be cash expenditures with the balance, being non-cash write-offs from past investments. Together, the operational transition and workforce reduction initiatives are expected to generate approximately $7 million in savings by the end of 2023, compared to 2022.

Fajardo says, “We are grateful for our affected team members and their contributions to Clever Leaves. While the decision to reduce our workforce was very difficult, it is an important extension of our ongoing work to align our expense base with our current revenue profile and improve our operating leverage over time. We expect our operational transition to generate significant long-term savings for the benefit of our customers and shareholders as we move towards profitability.”

The company expects to provide its 2023 outlook during its 2022 year-end earnings conference call in March 2023.

Colombia: Crop transition and dry flower strategy

Clever Leaves is currently reducing its agricultural production in Portugal, with the forecast that the cultivation of flowers will cease completely by the end of the first quarter of 2023. From the second quarter of 2023, the Company will exclusively cultivate its varieties of flowers in its Colombian greenhouses, where preparations for the export of dried flowers have been underway for the last 18 months. According to the press release, “Clever Leaves believes it remains on track to start sales of dried flowers in Colombia at the end of this quarter and has started the process of transitioning its flower production to Colombia for current customers” .

The company's Colombian operations encompass more than 1,8 million square feet (167 square meters) of fully built growing capacity, with EU-GMP certifications for the production of cannabis extracts and dried flower. The company believes that “Colombia's low labor costs and ideal agricultural climate give Clever Leaves an extremely important competitive advantage, which allows the company to provide its customers with environmentally sustainable and cost-effective production processes,” the statement reads. “In addition, the company's Colombian operations are home to a genetic discovery and development platform, comprised of external strains of leading cannabis brands and in-house developed products. The company expects the successful production of this discovery program to expand further as Clever Leaves accelerates its dried flower production.”

Fajardo continued, “We believe we are well positioned to grow rapidly in Colombia to serve our global customer base, while maintaining our focus on growing the most premium and commercially viable flower varieties. Our expansive, fully-built production capacity gives us significant scale to meet customer demand, and our EU-GMP certifications facilitate multiple pathways to our key international markets. We are working quickly to refine and expand our flower portfolio to the specifications of our target markets. We intend to use what we learn from growing flowers in Portugal and existing production efficiencies in Colombia to develop our flower capabilities and further complement our extracts business.”