GLGI (0.42) Feb Q3 results included a charge for the new tax act, so at a 21% tax rate adj EPS was $0.012, mildly disappointing but not too bad - that's EPS of $0.048 annualized, a PE of under 9. Looking ahead, I think the company will be reporting improving results in Q4 and particularly the next fiscal year.
Revenues were up sharply y/y, an impressive 39% jump, but gross margins got whacked, down to 14.2% from 28.3% y/y, so gross income fell 30%.
Part of the margin pressure was due to the ramp up of new production equipment and training new employees. Raw material costs probably a continued factor as well -
Cost of sales in fiscal year 2018 was $10,349,347, or 86% of sales, compared to $6,234,807, or 72% of sales, in fiscal year 2017. Greystone achieved a 39% increase in sales volume from fiscal year 2017 to 2018. The impact of this significant increase in sales volume had a direct effect on production costs resulting in the increase in the ratio of cost of sales to sales from fiscal year 2017 to 2018. Substantial increases in the number of employees, training and operating costs, recycling costs and the addition of five new injection molding machines plus associated supporting equipment have resulted in the increase in the ratio of cost of sales to sales during fiscal year 2018. Greystone continues to monitor pricing, operating procedures and cost of operations toward reducing the production costs of pallets thereby improving gross margins from sales.
Some good news is a big order from a new customer -
In February, 2018, a new customer entered into a contract with Greystone to purchase plastics pallets with shipments occurring from May, 2018 through about August, 2018. The customer prepaid $4,595,034 to provide funding to Greystone for procuring raw materials to produce the pallets. Revenue will be recognized by Greystone as pallets are shipped to the customer.
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