Sunora Foods Inc. (SNF.V) Audited Year End Results
Price: $0.255
Common Shares: 42,254,332
Insider/Institutional Holdings: 71% total, as per information circular. CEO holds 52%
Financials
ASSETS
Cash: $3,353,921
Accounts Receivable: $949,816
Accrued Interest: $2,908
Inventory: $438,064
Prepaid Expenses: $21,874
Income Tax Recoverable: $110,457
Goods Tax Recoverable: $11,023
Total Assets: $5,047,608
LIABILITIES
Accounts Payable: $954,092
Customer Deposits: $71,510
Total Liabilities: $1,025,602
Note: Sales in Q4 2015, Q1/Q2 2016 were affected by a co-packer issue. This meant that Sunora Foods Inc was required to find other means of distribution, hence hurting sales and margins during those 9 months. This is now resolved, see MD&A below. As well, sales are up year over year even after co-packer setback. Sales were stable year over year despite all this and the larger profit from 2015 was caused by currency exchange, not sales income.
2014 - $13,235,038 - $189,073 - Added listing expenses incurred
2015 - $10,815,959 - $502,182 - Net income of $200,000 affected by currency exchange
2016 - $12,254,101 - $282,794 - Currency loss of $34,000 or else net income was stable y/o/y
Q1 2017 results will be released end of May, 2017.
MD&A Highlights
Sunora sales for the year ended December 31, 2016 were positively impacted by an increase of 13.3% over the previous year due to sales growth in the United States and internationally.
The net income and comprehensive income in the year ended December 31, 2016 of $282,794 compared to $502,182 for the previous year, a decline of 43.68%. Instead of foreign exchange gain of $204,165, there was a foreign exchange loss of $33,456. In addition, the gross margin for the year ended December 31, 2016 declined by 0.2% from previous year despite the 13.3% increase in sales. The lower total gross margin can be attributed to a lower percentage of sales in packaged products that have a higher value added.
The Company also had an economic dependence on one customer in 2016 and 2015. Sales to this customer were 21% in the three months ended December 31, 2016 (2015 28%) and 19% (2015 17%) of total sales in the year ended December 31, 2016.
Sunora's sales to the United States have recently trended higher in comparison to sales in Canada. Overseas markets are continuing to grow and provide greater long term stability to sales. The growth of sales in emerging markets, with growing awareness of healthy food choices by the expanding middle classes, is a positive trend for Sunora. Overseas sales in the fourth quarter increased significantly because of the timing of the New Year celebrations in Asia and the general positive trend.
Sunora has increased sales over the year due to marketing efforts. Sunora has established strong relationships with sales staff and given them more flexibility and support as mutual trust has developed in these relationships. In North America, Sunora has outstanding commissioned brokers who have introduced new customers to the Company. Sales to independent distributors have also grown for Sunora, mostly in countries overseas, which has given Sunora entry into many foreign markets.
The foreign exchange gain or loss is primarily a result of the inventory purchases and sales that are denominated in US currency.
Outlook
Sunora maintains strong relationships with strategically located customers in North America and overseas. These relationships continue to drive demand for food oil products from Canada, with Sunora well positioned to meet existing and additional demand. Management has focused on increasing visibility in emerging markets, with a specific focus on the economies in Asia, with a view to meet this increased demand for Canadian manufactured food oil products. Sunoras operations are impacted by geopolitical situations that may hold up deliveries as was experienced in the fourth quarter of 2015. As the middle class in these emerging economies demands higher quality and healthier foods, Sunora is well positioned to meet additional demand.
Management is actively identifying and analyzing operations that might increase sales and profitability for the Company. Prospective businesses considered include packagers and suppliers in the food oil industry. With each operation identified, a detailed review and analysis is undertaken by management.
Management is also actively considering possible new products that may benefit from new domestic and international markets.
With the continuing improvement in the United States economy and new customers being added in Asia Sunora is well placed to improve its profitability and financial position.
Sunora has only one long term contractual obligation of a lease on its office facilities in the Provident Professional Building in Calgary, Alberta. This lease for 1,038 square feet of office space terminates on August 31, 2017, and has an early termination clause with nine months' notice during the last two years.
