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For what it's worth : I don't like to take sides on companies. I think it's inherently dangerous to become emotionally attached to stocks in some way that loses your objective analysis. That said I have learned from this forum - in some ways the hard way - by having attention focused on the weaknesses of management. I don't think many CEOs set out to lie to their shareholders. But some are naive or their skill set lies elsewhere.
In the case of KMKs current CEO and KMKs overall approach, the fear I have built up is that they are potentially too much a collection of geeks interested in inventing things, and not commercial enough to sell the things they've invented at scale. That's one simplistic view. There are others.
Above said, winning contracts from a US government agency isn't easy. So I remain open-minded. There is a chance that the solutions they've designed are slightly ahead of their time, and that as we head more into a world of geopolitical instability, which seems clear for the next decade at least, that sales of these solutions will gain traction. Then my fears become: will foreign agencies seek to replicate what they've built? Maybe too hard. Or worse, do some of these solutions just not have a big enough addressable market to make the ROI of inventing them worthwhile? I'm not deep enough into it to know the answers.
But I am far enough into being a shareholder of KMK over many years that it's not worth giving up the intimate sense of the share price that I have built up over time. This is worth something, especially if it's a company that has some potential even in the hands of weaker management. In my view you don't buy stocks like this and sit on the holding, otherwise your average cost price will always be too high. I started out at 12p or so but when I realised the price was in a constant drift, I implemented a much more involved trading strategy. I wait for deep levels of weakness and buy in, then sell on days of strength like today. It's the only way to bring your average cost down to an acceptable level. Some don't have time for that which is understandable. Some understandably prefer to move on to a company with better management. There is also a flight to quality going on which has more to go in my humble opinion. Financing is more expensive and the availability of credit is getting tighter, so you've got to manage your risk much tighter now. Good luck everyone :-)
I listened to the full recording of the Q&A yesterday. Some thoughts for what it's worth:
- "Last year was an aberration" due to the Ukraine/Russia situation - referring to the high level of sales as farmers sought to secure supply due to the uncertainty
- "We are focused on sales" and our costs are a lot about our sales team travelling around, but in another breath along the lines of "we dont need to do any research on who to sell to, we know who to sell to" ie. farmers in the area around the local operations in Brazil
When I knit all of that together I am left with the impression that this isn't a business with significant long-term upside. If they achieve decent annualised sales from the local farmers in the long run, then it should be reasonably profitable most of the time, and that may result in a dividend being paid at some point (though I dont hold my breath). But there isn't any indication here of real ongoing growth potential from my point of view. This is a local fertiliser supplier to some farmers in Brazil.
Add on BM's focus being split between this and Jangada Mines (stock price down 38% on 1 year trailing basis, BM owns 21% of that business). Add on the poor communication to the market - if last year was such an aberration of a sales result, then why enter this year with such bullish projections ? And then change them from one minute to the next - well run companies guide the market in a much smoother manner. Is he too stretched? Is his focus elsewhere?
I feel for the guy but this is business. There might be some value at this level, but there are also bigger and inherintly safer companies out there with better growth prospects and more solid management teams where I judge capital to be less at risk, so I decided to exit
Re Verde I was wondering the same. However, keep in mind Verde's SP is still -61% on a 1 year trailing basis after the recent rises. What frustrates me about Harvest I think their communication of underlying factors could be better. I remain open-minded about the revision of sales forecasts in a market that is clearly under stress and suffering from significant short-term movements.
Verde's press release this morning had this statement from their CEO:
“We are reassured by Verde’s renewed net profit despite the most challenging fertilizer market conditions in recent years. Brazilian farmers have grappled with the convergence of the highest interest rates since 2006 and their dependence on credit. This peaked in Q2 2023, period when farmers must acquire inputs for the upcoming planting season, a challenge compounded by the dip in agricultural commodity prices exactly when their crops should be marketed. In this extraordinary context, foreign fertilizer companies with lower capital cost can offer better terms to Brazilian farmers, who have a difficult choice between the products they want to buy and the ones they can afford to finance,” commented Cristiano Veloso, Founder, President & CEO of Verde.
This aligns with Harvest's statement but provides a bit more critical colour in terms of interest rates in Brazil and joining-the-dots on crop prices falling at exactly the point they market their product.
The gap between foreign markets interest rates and interest rates in Brazil should continue to converge from here. I'm just generally concerned about how long it will take to recover the SP from here and continue to doubt BM as CEO, particularly as his mining company SP has also fallen so much, he's split between two major projects. Doubling down for an SP recovery is tempting but I'm starting to feel there are other companies with more convincing CEOs and management teams that stand a better chance of growing capital. I might go down the ETF route actually. Diversification plus potential to broaden out the scope beyond fertiliser.
A valid concern to flag in general, but hopefully less of a concern in this specific case. These projects are in established mining areas where communities with mining expertise should welcome the employment potential.
I like many others here have lost confidence in HMI management. The 18 April update maintaining 200,000 rolled back 6 weeks later was inexcusable for me. My suspicion is Brian McM is spread too thin across his other mining project, but that's speculation. In any case communications are poor, leading to potentially inflated SP sometimes and right now potentially even an SP with some upside in it following the sudden about turn.
In the meantime, I wonder whether the collapse in the UN grain deal will have an impact on the fertiliser price. The collapse of the deal also invalidates the deal whereby Russia was allowed to export fertiliser. However, in all the digging I did yesterday I only managed to find one article about that which stated Russia didnt get much fertiliser out under that deal anyway. All the same, perhaps the overall threat to the food supply through that channel may increase the fertiliser price again.
Interesting. I also follow Sivers Semiconductors in Sweden which has a photonics business that’s getting excited about potential business from tier 1 oems. Risk I see there is multiple suppliers are in play and who will ultimately win
They gave a heads up to the market he would be changing focus on 7th March.