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Lol ! Sensible idea - Toilet Tissue prices will be increasing by rather a lot over the next six months I would imagine ! I am on board too with some more shares.
Will be interesting to see what happens over the next few week
Well I have made my investment......
After reading the RNS, I instructed her who does the shopping to go long on toilet roll. We are now hedged against inflation for at least 6 months here.
They do come across as a bit desperate, for example in their use of invoice factoring.
I had another quick look regarding your comment, they claim the margin is 24%, yet that doesn't account for distribution costs at 6M, and then administration at 14M. Once you remove those 2 costs, you are left with negative already, that is before the finace costs etc.
"distribution pressures, notably the availability of HGV drivers, and the increased scale of the operational cost base following the acquisitions"
The administration costs have jumped from 10M to 14M, and there is no real explanation about this in the report as far as I can see. This feels a bit like, there may be issues with the companies they have purchased?
I bet who ever sold them those companies might be glad to be rid of them.
I think the price would need to be lower for me to buy here.
Good summary Dartron, I am thinking along similar lines. What gives me confidence to buy is that they have such a decent share of the market, particularly on Private Label, that the grocery trade cannot afford to let them go to the wall, as they cannot replace the 80k tonnes they have with someone else in the UK, there is not enough capacity, so the trade have to support them with large price increases, and it's a slow slog back to profitability and a share price rise. The other scenario is that the shares fall a bit more, and someone buys them, and has to pay a premium for the shares. Remember they have been here before back in 2018 when the shares fell as low as 7p, and they recovered from that. Part of their problem though is that a tissue industry insider tells me they have been taking Private Label contracts from the likes of Wepa & Sofidel at stupid prices to gain volume, and have now been hit with a tsunami of higher costs. I don't think the aforementioned suppliers would let profitable contracts go ?
First of all, I think this such a great example of how inflation will impact us all. The story told across the whole supply chain, of why the product requires steep price increases. However, I cant get my head around the fact that the finished product is itself a commodity, and surely people will pay as much as they need to for toilet paper? I think this is how the RNS reads, in that the prices will increase when agreements are renewed.
However, these guys have taken on a lot of debt. The investments sound like sensible things to do, but it strikes me that they have over reached in doing so? (Also sounds like the Mill and the Div are on hold). Really shouldn't be seeing a loss per share on something so basic as toilet paper?
Not sure whether to take a punt here, logic says that they are needed and will survive, but results paint quite a dark picture, and the issues out of their control aren't going to improve any time soon.
"As a percentage of the overall selling price of paper, energy costs currently comprise as much as 50%"
I will be loathed to subsidise the good folks of Poundlands toilet roll via a placing!
Are there any more superior brains here that can share their take on the current proposition? Perhaps it is still too expensive to enter yet?
Choice extracts from the RNS:
"In Q2, the recovery of the cost increases incurred in Q1 progressed well across all retailers. Further increases of c.20% on tissue prices were forecast across the industry, with additional increases across all other raw materials including cartons, corrugated, plastic wrap, paper wrap and core board. Many of these cost increases were being driven by significant upward movements in energy cost, impacting all aspects of the supply chain. The total cost to the business of the first two tissue price increases was c.£40 million on an annualised basis. Significant recovery of these increased costs was achieved from retailers, with many price increases being agreed that would positively impact in Q3 and fully across Q4"
"As the Group entered Q3, accelerating energy costs were impacting the paper reel supply, which, over a short period of time (c.5 months) saw energy costs for some suppliers increase by up to 500%, as hedging positions came to a close. Several suppliers in different regions globally ceased trading. As a percentage of the overall selling price of paper, energy costs currently comprise as much as 50% (previously 10%).."
"The Group has continued to develop its mill plans but, in light of the current spike in energy costs and building material cost inflation, investment in a mill will form a part of the strategic review announced in the Trading Update on 12 January 2022."