Sunora Foods Q1 Results. Financials + MD&A Highlights
Price: $0.20
Common Shares: 42,254,332
Insider/Institutional Holdings: 71% total, as per information circular. CEO holds 52%
Website: www.sunora.com
Financials
Assets
Cash: $3,133,920
Accounts Receivable: $1,254,247
Accrued Interest: $1,537
Inventory: $533,623
Prepaid Expenses: $15,760
Goods & Services Tax Recoverable: $10,545
Income Tax Recoverable: $118,130
Deferred Tax Asset: $159,545
Total Assets: $5,227,307
Liabilities
Accounts Payable: $1,084,857
Customer Deposits: $40,020
Total Liabilities: $1,124,877
NAV = $5,227,307 - $1,124,877 = $4,102,430 or ($0.097) or $0.10c a share net asset value. Junior earnings based companies with established positive cash flow usually trade at a 4-5 times multiple, if not more. Even exploration based companies with no revenue and high-risk trade at a greater multiple than SNF, which is a 27 year old established company(see their website)
Q1 2017 Sales Breakdown
Sales: $3,480,230 (last year sales - $2,687,379)
Income Before Tax: $91,178
Net Income: $66,560 (last year profit - $24,971)
Breakdown of sales by region
USA - $2,701,689 (Last year - $2,167,415)
Canada - $252,384 (Last year - $235,713)
International - $526,157 (Last year - $284,251)
Previous FULL Years Of Sales
2014 - $13,235,038 - $189,073 - Added listing expenses incurred from merger with capital pool
2015 - $10,815,959 - $502,182 - Net income of $200,000 affected by currency exchange
2016 - $12,254,101 - $282,794 - Currency loss of $34,000 or else net income was stable y/o/y
MD&A Highlights
Sunora Foods Inc. (“Sunora Foods”) is a Calgary-based trader and supplier of canola, olive and other food oils. Currently, the Company is a relatively modestly-sized player participating in an international business populated by some of the largest companies in the world. It has successfully maintained a niche position that has been achieved by building strong relationships with its suppliers and customers through a history of reliable and responsive service. While the Company regularly cooperates with many of these companies, it also occasionally competes with companies that have far greater resources.
Sunora had 29.5% higher sales for the three-month period ended March 31, 2017 than the comparative three-month period. The increase in sales resulted from greater sales of bulk oil to the United States and an 85% increase in sales overseas.
The $66,560 of net income and comprehensive income in the three-months ended March 31, 2017 was 167% higher than the same period of 2016. This was primarily a result of foreign exchange income of $10,833 as opposed to a foreign exchange loss of $82,655 in the comparative period. Gross margin declined from 9.4% to 6.7% as a result of an increase in bulk sales, which yield lower margins relative to packaged products.
Sunora's current assets consist of cash, accounts receivable, inventory, prepaid expenses and income tax recoverable. Cash is held for working capital requirements and to fund expansion costs for new markets and customers. A policy of conserving cash is rigorously followed by management in order to sustain operations and foster its marketing strategies. Accounts receivable increased 32.1% from December 31, 2016 due to higher sales. The 21.8% increase in inventory is due to increased purchases in anticipation of future sales.
Sunora's current liabilities consist of accounts payable and accrued liabilities, income tax payable and customer deposits. Accounts payables and accrued liabilities increased 13.8% from December 31, 2016, due to increased purchases at the end of this quarter. Nevertheless, Sunora is committed to its policy to manage its trade payables on a current basis and maintain its excellent credit standing.
A direct correlation to Sunora's increased sales has been its marketing efforts. Over the years, Sunora has established good relationships with its sale staff, giving them more flexibility and autonomy as mutual trust has developed in these relationships. In North America, Sunora has worked with brokers who have introduced new customers to the Company. Sales to independent distributors have also grown, mostly in overseas countries, who have given Sunora entry into many foreign markets. Product sales to foreign distributors and for other customers are final and not returnable.
Net income for the first quarter of 2017 decreased 16% from the fourth quarter of 2016. The decrease was due to the lower gross margins. Compared to the quarter ended March 31, 2016, net income increased by 167%. Earnings per share – basic and diluted, for the first quarter of 2017 and for the fourth quarter of 2016 were $0.002 per share for each quarter. It increased from $0.001 per share for the quarter ended March 31, 2016.
Management is actively identifying and analyzing operations that might increase gross margins 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. Specific focus is currently on packagers with operations in Canada that are looking for a strategic partner to expand international operations. Management is also actively considering possible new products that may benefit from new domestic and international markets where it is currently active. With the continuing positive momentum in the United States economy and new customers being added in Asia, Sunora is well placed for the future. |
