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I have no idea whl2, asking myself the same thing. I’d imagine we are in the very few minority of shares that are up 100% ytd. Maybe increasing their cash holding, who knows. Maybe trimming some risk- economic situation not looking so rosy and yields up can get returns elsewhere than stock market.
There could be all sorts of personal reasons. But I agree does seem a very odd time to sell. I would imagine something personal- the price was above 15p for 3 months- after a 300% rise ytd that would have seemed the time to unload. Easy in hindsight though.
Either way. There’s many multiple reasons to love this business in my opinion, which I’ve harped on about for years now. With a big seller keeping the sp contained the opportunity to get a bargain in my opinion is even better. AIMHO
https://agenciabrasil.ebc.com.br/en/geral/noticia/2022-03/food-security-matter-national-security-says-minister?amp
Low cost, organic, and most importantly local! Brazil looking to be self sufficient- they currently import 80-90% of their fertiliser. If there’s one thing the pandemic did it’s highlight how reliant countries are on others for crucial products.
Would like to see the limestone asset up and running I should add. As I think the revenue generation there should be quick. The farmers who buy kp fertil will buy limestone, if they already buy kp fertil, no reason why we can’t offer them limestone and a deal for buying both. Limestone is a well known product so won’t need the testing phase the farmers go through with kp fertil!
Expansion of Arapua! With the growth we’ve had/ are having now. With the potential demand within 300km and the farmers really coming round to this more sustainable and healthier way of farming that would be my preference.
Thanks Sussex. The product was gaining real traction way before the issues in Europe hence the rns on 8th march - · “CY22 accumulated sales orders as at 28 February 2022 totalled 30,161 tonnes, an increase of over 1,070% compared to internal forecasts for the same period”
I certinatly haven’t based my investment decision on anything that’s been going on in Europe. We’ve sold 50kt 2020 - 85kt- 2021 and 2 months before anyone knew anything about the war or increasing gas prices were mentioned the company stated 150kt sales target. This growth is so obvsiouly due to the farmers really beginning to like our product. Organic, local , low cost, works just as well if not better than traditional fertiliser, better tasting product coffee reported by farmers.
The company is starting to really benefit from the last 2/3 years of work and sales with the farmers. The sanctions and possibly increased freight costs and logistics may well have given us a small tail wind but we were always headed in this direction!
I’m not concerned Mike personally. For the reasons I outlined in previous post. Also suspect swingy could be correct. Either way- they’ve announced in previous rns they expect to exceed 150kt.
Think Brian has learnt previously about managing expectations. To say they are going to exceed 150kt and planning for 200kt production so early on in the year suggests he really is quite confident of achieving those numbers.
The products great, the farmers love it. I would suggest going back through the last 6 quarterly updates. From start of 2021 onwards. We’ve beaten management expectations every single time. This in my opinion highlights the trajectory the company is now on and hopefully will see the trend continue. AIMHO!
Most likely 150kt orders exceeded in end of month update smalley, just my opinion though.
That opinion is based on achieving 117kt orders for the first 6 months, Q3 traditionally being our best year, although I can’t see us beating Q1 70kt. Also Brian on investor meet call says team in Brazil expecting good Q3.
Verde just announced issues with the building of roadworks for its plant 2. They’ve revised down estimates and sales from 250kt in q3 to 188kt and 198kt down to 135kt in q4. Shortage for the farmers of 125kt till yr end.
Hopefully we are pushing marketing hard and maybe able to capitalise on verdes inability to produce the original amount they thought they could.
This is nothing to do with demand for fertiliser in brazil, this is verdes expansion plans occurring some issues. Hopefully we capitalise!
Topped up this morning. At £20m mcap - with high conviction of a good Q3 and the general macro tailwind, all capex costs completed to get to 320kt and sat on the 200 day moving average and trend line support i’m a happy buyer at these levels even though my average is 4.5p!
25p = £45m mcap. I would be very disappointed if the company were taken over at that price.
£5m in profits I imagine this year with brian already talking about dividends asap in interviews, no added capex up to 320kt . 100 year resource, likely £9-11m profits at 320kt capacity. Likely Over 100% increase in sales volume this year. Verde- local competitor, granted producing bigger amounts but sat at £250-300m mcap. Limestone asset with excellent potential of significant revenue generation selling to a loyal kp fertil customer base, with probable low cost capex similar to Arapua. Possibly the hottest sector right now. Increasing population. Organic certified fertiliser that’s cheaper and proven to be as good if not better than traditional fertiliser, in the country with one of the highest demands for fertiliser. Installed solar panels and no significant energy costs other than diesel for trucks. All for £45m mcap… no thank you! I’ll take the organic growth + or dividends!
Agreed Mike.
Running through some numbers. Q2 we sold 47kt- which would equate to just over 15k a month. Obviously that’s just an average over the 3 months and some months likely to be more and some less.
However to end of June we sold 117kt. Traditionally q3s our best quarter. Although this year it would’ve hard to beat q1. However I’d assume we’d at least be tracking q2’s numbers. Company stated in q2 update “On track to exceed 2022 sales target of 150,000 tonnes” so we’re nearly 2 months into q3 and if we tracked q2 progress we’d be nearing 147kt orders. Therefore expecting and hoping the company would rns when that figure was exceeded and my assumption would be that could be due in the coming days and week or 2 ahead. IMHO
Correct Chris- 4% royalty to be paid and marketing costs likely to increase in line with the amount of product we sell.
Interesting to see how much will be devoted to the limestone asset. I see that as a major revenue generator in the sense that if by 2023/24 when limestone may come online- by then I would certainly like to think we’re at capacity selling 320kt of kp fertil. Farmers buy limestone every year and the farmers who buy kp fertil will be buying limestone also. Harvest could incentivise discounts for buying the limestone alongside the kp fertil and see a new revenue stream basically overnight. Limestone is limestone so won’t need to go through the lengthy process kp fertil had to the last 3 years with farmers having to test the product for a 12 month growing cycle on a small part of their crop, seeing the results for themselves then come back for bigger quantities the year after.
Also there’s a hefty tax losses from previous years- so no tax will need to be paid for the next few years.
For those investors that have a longer time horizon than just a few months. I would suggest a 250-300kt target next year is achievable. With the macro picture strengthened and giving us a great tail wind, with competitors such as verde growing sales yr on yr at 50%+ along with our track record of growing at least 50% in sales volumes yr on yr- even during the vivid downturn when our sales team had to significantly trim back marketing to the farmers. 50kt - 85kt - 150+It I would think 250-300kt is achievable. In my opinion that would give us profit around £7m-£9m a year. With a fully paid for 320kt capacity. All for £20m mcap. This in my opinion is how you make money, find a company that can grow organically in without the need to raise with a product that’s clearly in demand. The board have deliberately kept things as simple as possible and it’s paying dividends IMHO
The biggest cost that goes into traditional fertiliser production is natural gas. Prices at highest levels since 2008. Significant!
Also listened to the verde agritech call the other day, the ceo pointed out something quite interesting. He said there’s a 45-60 day wait time to unload the product once the ship has docked in Brazil. Alluding to the difficulty to bringing imported fertiliser in from abroad.
What’s peoples thoughts on the profit number this year? Brian stated on 8th February whilst sat at £9m mcap that the company will generate 30% of mcap in profits = £2.7m. A healthy number, however since then we have had 3 price rises and I would expect us to be selling the product at around 350 brl or 95 aud - with a 14 aud opex.
Adding onto the above. Brian stated this while 150kt was very much the target. Since then in q1+q2 we have hit 117kt already with q3 now being traditionally the strongest year for sales. Q3 in my opinion is almost certain to beat q2 numbers of 47kt. Brian also stated in investor meet presentation 6 weeks ago that he spoke to the team in Brazil and there expecting a good q3. Company rns’d plans to ramp up production to 200kt which should now be the target in my opinion.
2.4m aud cash as of start of july. Capex costs completed. At 200kt with an average sales price of 95 aud that equates to 16.5m aud revenue. Think it’s reasonable to assume 10m aud profit at 200kt this year or £5m profit. I really think there’s a decent chance end of next year sees a 1-2p dividends returned to shareholders.
Anyone have any thoughts?
Going back to expansion of Arapua. 16:18 mins into crux investor interview with mark heyhoe in 2020 talks about this. Says before we hit 320kt capacity they’ll put added expansion to that capacity. Bit vague. Would like to hear more around this from management.
Yes I did remember that Sussex. I don't know how much money has been spent in total on the mine build and infrastructure but the company raised £9.7m in 2018, a good chunk of this was spent on mine infrastructure. Pure pie in the sky I know but even if it took the company £10m to build another 320kt capacity it would be worth it, as long as they knew demand was there which every indication suggest it is and will continue.
At this rate of sales growth with the kp fertil brand becoming more and more recognised management surely must be looking a couple years down the line and thinking expansion of arapua.
Link here shows how supportive brazil are of mining projects, id imagine organically sourced fertilizer in the heart of the Brazilian agriculture belt may tick boxes if needed. Just my opinion https://www.bnamericas.com/en/news/brazil-takes-action-to-facilitate-financing-for-mining-smes