I used to work at Ford in an IT group on systems for producing financial statements. Ford is basically a manufacturing business, so can be compared somewhat to JBI. Only difference is that JBI is 2 distinct products with no dependencies between them. Blending and fuel. 2 different things. I am sure the blending plant has it's own customers before... they would still have them now.
One thing I can tell you, all Cost is related back to the point of manufacture. Ford makes parts of cars all over the world. in other words, a car might have a frame built in MIchigan, an engine built in Spain, and a dashboard from a supplier in Ontario. On that note, check out Automodular, sorry I digress. Internal transactions occur between all of the plants involved, the end result is which all those costs are related back to the plant where Final Assembly occurs. Internally, a selling price is established when the car leaves the plant and goes to the point of Sales within a given sector (North America, South AMerica, Europe, Asia, etc). Standard pricing is used to determine the profitability of the plant and to give the plant an incentive to save money (Total quality, Lean, etc). Cost per vehicle is totalled against the selling priceto the internal buyer (Standard Cost to the buyer). . Add to that some adjustment for exchange rates. Now, that is not applied exactly, that is why sometimes it is cheaper to buy a vehicle in the US and pay all the duties etc to get it across the border, exchange rate markup is not exact, for marketing reasons.
I just looked at Ford financial statements. It is by sector based on geography. North America, South America, Europe, etc. That is because they are different markets, regardless of the cost of the vehicle being sold. That engine made in Spain and the transportation to point of Final Assembly is still part of the cost of that car that is final assembled in Flint Michigan. Actually, that is GM land, whatever.
A car shipped for sale to South America has the same cost to the South American sector as one shipped to Canada, with the exception of a shipping cost, the cost of which is right on the window sticker.
The fortunes of Ford in Europe or Asia or North America is what is within management's control, and that is how they have to manage the business, with an accurate forecast based on macroeconomic factors, plus good knowledge of what customers want , and good product. They have no control over manufacturing costs. Nothing more they can do. Pretty much all the major players in the auto sector are evenly matched in that regard.
Comparing that to JBI, JBI is basically a manufacturing business with two segments; manufacturing oil from plastic and blending. They are independent of each other. JBI can blend or they can manufacture oil and sell to refineries (sic.. I know, I know). It would be natural to separate those two businesses, to better control their costs. One would want to see the costs of the two operations vs the revenues from them. That is only natural. And from an accounting standpoint, the costs of the two businesses should be related back to the plants the products emenate from. That is just common sense. That way adjustments can be made so that things become profitable.
Nothing in GAAP prevents JBI from doing that, in much the same way that nothing prevents Ford from reporting it's results b y geopraphic sector. SOme weeks back it was announced that Europe will be bad this year. Ford can adjust. If they reported by plant it would not work, on the other hand. A Ford Mustang sold in Canada costs exactly as much as the Ford Mustang sold in Euope. Nothing you do at the plant however, will change whether or not those cars sell. Except product quality... R&D.
There is some Marketing focus... some models are produced for specific markets. But still, the cost is related back to plant.
Contrast that back to JBI further. JBI says that it has a fantastically low manufacturing cost. Ford knows that it cannot change that much relative to it's competitors. Now, all the auto makers outsource to cheap-labor environments, granted. But, basically any gains possible in manufacturing have been realized. JBI, on the other hand, thinks it is on a plane higher than anyone else. LIkely not true given the financials thus far.
Furthermore, JBI does not even know who it's customers are. We have seen every possibler scenario under the sun. Refineries, gas stations, distributors, on-site partnerships, bartering, we have seen it all. If they don't know by now, something is not right.
By not splitting the disparate businesses up, investors have no visibility, and management has no control.
JBI has no markets. Not yet. If they defined markets, that may yield a logical definition of sectors. Cost should be related back to the producing plant. It does not make sense to me to talk about the success of a processor. Yes, the more processors are running the better. But basically, forgettting abot ROI on initial investment, the more processors are running the better. Cost per barrel will be lower. BUt that doe snot mean much, as with Ford. I don't think the advantage in manufacturing cost is there. What matters is finding a client/ market and pursuing it. When y ou read the JBI financial statements now all you read about is the manufacturing. It really is not what is important, what about customers/ markets? |
