Sunora Foods Inc. Year End Results. Financials + Management Discussion Highlights
All information can be found at www.sedar.com
Price: $0.16
Common Shares: 42,254,332
Insider/Institutional Holdings: 71% total, as per information circular. CEO holds 52%
website: www.sunora.com
Financials
ASSETS
Cash: $3,214,699
Accounts Receivable: $1,304,280
Inventory: $426,631
Prepaid Expenses: $31,285
GST Recoverable: $10,620
Income Tax Recoverable: $116,407
Deferred Tax Asset: $159,545
Total Assets: $5,263,467
LIABILITIES
Accounts Payable: $1,256,855
Customer Deposits: $72,502
Total Liabilities: $1,329,357
Sales Performance
Revenue: $13,935,676
Net Loss: $121,636
**note** Sunora Foods made a profit of $238,065. However, this was lost due to a legal settlement from 2015. See MD&A Highlights for more information.
MD&A Highlights
Sunora’s sales for the year ended December 31, 2017 were positively impacted by an increase of 13.9% over the previous year due to sales growth in the United States. The net comprehensive loss in the year ended December 31, 2017 of $135,795, compared to income $282,794 for the previous year, was principally due to the claim settled in quarter 2 of 2017. A foreign exchange loss of $60,100 was also incurred in 2017 compared to $33,456 in 2016. In addition, the total gross margin for the year ended December 31, 2017 declined by 12% from previous year despite the 13.9% 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.
On December 31, 2015, a statement of claim was filed against the Corporation by one of its vendors who alleged that Sunora wilfully did not accept deliveries of soybean oil pursuant to a contractual arrangement. The vendor claimed USD $506,798 in damages relating to losses allegedly suffered. Sunora denied any responsibility for such a claim. However, subsequent to June 30, 2017, on the recommendation of legal counsel, management settled the claim for CDN $390,000 which was completed in late August 2017. The claim settlement comprises the full cost of the claim and the related legal fees which were accrued in the financial statements for the quarter ended June 30, 2017 and is reflected in the year ended December 31, 2017.
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 generally increase because of the timing of the New Year celebrations in Asia.
Sunora has increased sales over the years due to its 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.
Sales for the fourth quarter of 2017 were 14.6% higher than the third quarter of 2017 due to the increase in U.S. and overseas sales. Third quarter sales were 7.3% higher than the second quarter. Second quarter sales were 9% lower than first quarter
Cost of sales in the fourth quarter of 2017 was 14.8% higher than third quarter due to increased sales. Third quarter cost of sales was 9.3% higher than the second quarter due increased sales. Second quarter cost of sales was 10% lower than the first quarter due to 9% decrease in sales. Gross margin for the fourth quarter of 2017 was 6.2% compared to 6.4% for the third quarter. Second quarter gross margin was 8.0% compared to 6.7% for the first quarter ended March 31, 2017.
General and administration expenses were higher in the fourth quarter of 2017 due to various charges recorded at year end, including audit and accounting fees and profit sharing bonus. Net income for the fourth quarter was comparable to the third quarter. As a result of the settlement of a legal claim in the second quarter, there was a loss in the second quarter and it was substantially down from the first quarter.
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. Sunora’s operations, however, may be impacted by geo-political situations that can hold up sales 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 continuing strength in the United States economy and new customers being added in Asia, Sunora is well positioned to grow and increase its sales.
