Now its the margins...good grief. We knew they would come down with feed growing rapid with lower margins.
I've always said cigs would be huge while many were very skeptical. Orginally being a wait and see attitute for many, which was understandable. Now we revisit the margin issue which when thoroughly examined is explainable. Q1 2010 margins were down huge because of a huge order(up 600%) for raw material which has since been discontinued for higher margin cigs. This transition has been costly in regards to margins but has been creeping up q/q.
The biggest margin problem is feed. Margins are historically in the 15-18% and will impact the businesses marginally by about 3-5% points. While this appears large remember this particular segment is going to grow expotentiously(sp) to the tune of 100% annually for the next 3-5 years which alone will put pressure on margins even with higher margin cigs and beverages. Cigs/Beverages will offset some of the margin pressure as they will be in the 40% range it will not totally offset the 15-18% feed.
What I find puzzling is so many individuals on CGS board have bashed Chinese Microcaps while the worst offenders are the uplisters, such as TSTC, UTA,and NEP to name a few with accounting issues, unsubstantiated contracts, raising money on offerings with the stock at all-time lows with millions in the bank. IMO, these are the real culprits with margin problems etc.
Steven
AI
