Big Rock Brewery Inc. (TSX:BR) is a Calgary-based producer of craft beers and cider. Shares of the company were up 6.19% in late morning trading on June 14. Its stock has dropped 17.5% in 2018 so far. The company released its first-quarter results on May 3.
Big Rock reported an operating loss of $0.505 million compared to $1.1 million in the prior year while also reducing its year-over-year net loss by over $380,000. Sales volumes were down from Q1 2017 to 41,144 and net revenue was down to $9.46 million from $9.58 million. The company made price adjustments in Alberta that had a positive impact, with its net revenues especially sensitive to pricing.
The Albertan government made changes to mark-up and grant structure which negatively impacted Big Rock’s revenues. This included an alteration to the Alberta Small Brewers Development Grant policy, which now has an annual sales level of 150,000 hectolitres (hl) as the maximum level to qualify. Big Rock exceeded this number in Alberta, and therefore was subject to higher net mark-up costs last year. The company has made changes to improve its grant rate going forward.
Big Rock will continue to navigate a hostile regulatory environment in Alberta. The stock is down 26.3% year over year. To add to that, beer sales have deteriorated relative to spirits and wine in recent years. The bump in June is encouraging, but investors may want to wait until more tangible improvement is achieved looking long-term before jumping in.
