Value Microcaps Food, Agriculture and Soft Commodities

[KevinKT]

CTL Q4/10 Above Scotia Expectations; In Line with Consensus

Event
¦ Catalyst reported EBITDA and EPS before items of $28.7M and $0.01, respectively, compared to our $21.3M and negative $0.04 estimates. Results were in line with EBITDA consensus of $27.5M.
Implications
¦ EBITDA was $8M above our expectation on the back of lower-than-expected COGS ($5M), better realized prices ($5M), and higher shipments ($1M), partially offset by higher SG&A ($3M).
¦ Although the company has announced price increases beginning April 1 for most grades, the company continues to be pressured by high input costs and a strong C$; with the latter affecting EBITDA by about $7M for every US$0.01 change in the C$.
¦ Debt levels remain high (63% of capital), while liquidity was $189M at quarter-end.

Recommendation
¦ We continue to rate Catalyst shares 3-Sector Underperform due to a high debt level and limited free cash flow generation.