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08-06-2012, 03:12 AM
The company has not changed its model of contracting potato purchase with farmers and this might spell serious trouble ..
If the potato purchase price is fixed based on existing opportunity cost of growing another crop other than potato, the company does not seem to be in a position of bargaining power ...ie at the mercy of government to provide minimum income to the farmers ... Is the company merely a tool for the govt to achieve its social objectives at the expenses of investors ?
Appreciate comments pls
If the potato purchase price is fixed based on existing opportunity cost of growing another crop other than potato, the company does not seem to be in a position of bargaining power ...ie at the mercy of government to provide minimum income to the farmers ... Is the company merely a tool for the govt to achieve its social objectives at the expenses of investors ?
Appreciate comments pls
(07-06-2012, 06:11 PM)jzk Wrote:(02-06-2012, 03:20 PM)Stockerman Wrote: too bad for company...had already declared bad debt of 90mil RMB for first time in history...things are looking very bad, with impending CB repayment in end June...
The company does not seem confident to be able to recover the maining A/R on time for repayment or prepare for new harvest..
CB repayment is relatively small and should cause no harm (of course, the contrary outcome would definitely be weird). At this stage of fiscal year, the company doesn't use that much cash, and the real test will be the autumn harvest season.
Cash flow problem was originated by two simultaneous drawbacks of the same cashflow-wise scale: 1) Price movements and unsuccessful potato buying and 2) explosion of receivables. The latter tied up 200-300M of cash in unprecedented way. If that pile was to be cashed out, there wouldn't be any problems. Considering the 90M write-down mentioned by Stockerman, I am a bit worried that this might not be the case.
Bad scenario: More write-downs, slow receivables turnover, problems with DBS -> The company will be in serious continuity problems by autumn, and will at least be forced to divest heavily and with unfavourable price level.
Good scenario: Minor write-downs, accelerating receivables turnover, successful harvest season -> The company will free hundreads of millions of cash, they will deal with DBS flying colours, they will have negotiation power to achieve a favourable joint venture in modified starch and eventually have turnover of well above a billion cny with eps of at least sgd 0,10. All this taking place this fiscal year.