Canaf Investments Inc. Q1 2019 Results. Financials + MD&A
Ending January 31st 2019. All information can be found at www.sedar.com
TSXV Symbol: CAF - OCTBB Symbol: CAFZF
Price: $0.09
Common Shares: 47,426,195
Insider Holdings: 12,304,085 or 26% - Majority Owned By CEO & Family
Warrants/Options: 0
Financials (All In US Dollars)
ASSETS (Jan 31 2019)
Cash: $591,414
Trade Receivables: $1,521,001
Sales Tax Receivable: $463
Inventories: $622,443
Prepaid Expenses: $22,965
Property & Equipment: $870,984
Interest Bearing Borrowings: $1,287,458
Intangible: $1
Total Assets: $4,916,729
LIABILITIES
Trade Payables: $745,700
Sales Tax Payable: $37,844
Income Tax Payable: $84,206
Total Liabilities: $867,750
Asset/Debt Ratio: 5.67:1
Q1 2019 Performance
Sales: $2,419,633
Gross Profit: $329,519
Net Income: $187,367
Foreign Currency Gain: $401,214
Total Net Income For Q1: $588,581
2017 Net Income(after currency exchange & taxes): $439,664 USD
2018 Net Income(after currency exchange & taxes): $298,144 USD
2019 Q1 Net Income (after currency exchange & taxes): $588,581 USD
Total Net Income Added In 11 Quarters: $1,326,389 or $1,750,833 based on 1.32 exchange
MD&A Highlights
Whilst the Corporation reports another profitable and financially positive quarter, the board can confirm that it is actively looking for new opportunities that will offer long-term growth potential and stability of sales for shareholders, be it related to its existing anthracite calcining operation in South Africa or another new, and unrelated, sector.
With zero long-term debt, a strong balance sheet, and a cash flow positive business in South Africa, the Corporation believes it is in a good position to do so.
Sales for the first quarter of 2019 were low compared to the previous quarter in 2018 at $2,419,633 (2018: $3,273,213), a 26% decline, however gross profits grew to $329,519, compared with $248,562 in the same quarter in 2018, a 33% increase. Net income for the quarter remained static at $187,367 (2018: $187,126), but increased from $108,996 the previous quarter. Despite sales reducing during the quarter, gross profit margin increased due to discounted feed material being purchased during the period as well as savings made through acquisition of machinery, which subsequently reduced rental costs for the Corporation. The Corporation expects profit margins to reduce next quarter, and remain squeezed throughout the rest of the year, as Southern Coal continues to manage increased input costs.
The Corporation expects revenues to be reduced in comparison to the year ended October 31, 2018, mostly due to global pressure on the steel and manganese markets, which subsequently filters back to demand for Southern Coal’s product. During Q1 2019, the Corporation is pleased to confirm that a trial load of its calcined product was delivered to a new potential, and significant, customer. The Corporation hopes to finalise a second trial during Q2 and Q3, and should this convert to an ongoing supply, the Corporation feels that there is potential to return to the revenue levels of the year ended October 31, 2018.
During Q1 2019, Southern Coal made its final payment for the 14 million Rand loan from ABSA bank, which was drawn down in February 2015. Repayment of this loan now releases Southern Coal from monthly installments of approximately 392,000 Rand (approx. C$37,000 or US$28,000). As of January 2019, the Corporation has zero long-term liabilities.
As part of Southern Coal’s B-BBEE transformation program, Amandla Amakhulu (Pty) Ltd, (“AAM”), a 100% black, privately owned, and ringfenced, company incorporated in South Africa, acquired 30% of the issued shares of Southern Coal, from Canaf’s wholly owned subsidiary, Quantum, for the value of 18 million Rand. The financial effective date for the transaction is 01 August 2018.
Quantum in return received cumulative, redeemable preference shares in AAM in the amount of the purchase price. These preference shares shall provide preferential dividends, until redeemed by AAM. These dividends will be secured by an irrevocable direction from AAM to Southern Coal to pay Quantum such dividends from any distribution to AAM. Dividends were declared during the first quarter of $135,441.52
Expenses for the quarter were $119,276 (2018: $167,892) a reduction of $48,616, 41%, although not separately reported in Q1 of 2018 there are a significant amount of increased costs in relation to BBEEE compared to Q1 ofthis financial year.
