The Cann Group Ltd (ASX: CAN) share price has been one of the best performers on the local share market on Tuesday.
In morning trade the cannabis company's shares are up over 12% to $1.92.
Why is the Cann share price rocketing higher?
Investors have responded positively to an announcement in relation to the company's greenhouse facility in Mildura.
According to the release, an amended design for the large-scale state-of-the-art facility will increase the full production capacity of the facility by 40% to 70,000kg of dry flower per annum.
This was achieved after the company worked with its construction partners, including Aurora Larssen Projects, to improve space utilisation and efficiencies with the plant production systems. This resulted in additional flowering room and an increase in planting density.
In light of this increased capacity, Cann Group expects to generate annual revenues of approximately $220 million to $280 million based on the current wholesale price of cannabis dry flower.
Management also advised that Cann will target some production toward value-added downstream formulations and products, which will generate higher margins and revenues.
Completion of the facility is estimated to occur in the fourth quarter of calendar year 2020, with cultivation of mother plants at the site to commence in the third quarter of 2020. Siteworks have been completed and construction of the facility is now underway.
Cann CEO Peter Crock said: "We've previously stated our intention to set up at scale, and the opportunity to amend the plans for the Mildura facility significantly boosts our production capacity; improves our production efficiencies and results in greater revenue potential from the site. These design revisions draw on the very latest learnings from new cannabis production facilities being constructed in other parts of the world, in particular the state-of-the-art facilities designed by Aurora Larssen Projects for Aurora Cannabis in Canada."
Whilst this is good news for the company and its shareholders, it is worth remembering that its revenue forecasts are based on today's prices.
A lot can change between now and then, especially given the increasing supply of cannabis dry flower.
Elsewhere in industry, fellow cannabis companies Althea Group Holdings Ltd (ASX: AGH) and Auscann Group Holdings Ltd (ASX: AC8) are also trading higher on improving investor sentiment.
