|Canaf Group Inc Q1 2018 Financial Results + Management Highlights|
(All Information Taken From SEDAR)
Common Shares: 47,426,195
Insider Holdings: 15,391,328 or 32.5% as per www.Sedi.ca
Financials (All in US Dollars – Should Be Converted into CDN Dollars for accurate value)
Trade Receivables: $2,678,248
Sales Tax Receivable: $17,942
Prepaid Expenses: $31,114
Property & Equipment: $1,172,010
Total Assets: $5,189,196 USD
Trade & Other Payables: $2,211,185
Income Tax Payable: $119,979
Current Portion Of Bank Loan: $310,819
Remaining Portion Of Bank Loan: $85,760
Total Liabilities: $2,727,743
Asset/Debt Ratio: 1.9:1
Q1 2018 Sales
Quarterly Net Income: 552,815 USD - $707,440 CAD
Q1-Q4 2017 Sales
Yearly Net Income: $439,664 USD - $562,640 CAD
*Note : Canaf Group is currently on track to have a record profit year, already exceeding net income from 2017. $475,000 CAD is equivalent to $0.01 cent earnings. Most profitable junior companies trade in a 8-12 multiple range, making Canaf group undervalued based on the last five quarters.
Management Discussion Highlights From Q1 2018
OVERALL PERFORMANCE AND OUTLOOK
The results above shows the sale recovery and demand of the Corporation’s product which started in Q3, 2016. Sales for the three month period ended January 31, 2018 increased by 45% in comparison to the previous quarter and is expected to increase by a further 40% in Q2, as more confidence returns to the markets. (Page 5)
The outlook and profitability of the Corporation remains strong and the Corporation expects to continue to generate positive free cash flow during the fiscal year-end 2018 and, as it accumulates cash and reduces its gearing and increases its efficiencies, will continue to look at investment in related business opportunities in South Africa, a country which many now regard with a very positive outlook
The three month period ended 31 January 2018 saw the Corporation continue to recover from significantly reduced sales between mid-2015 to mid-2016, when depressed global commodity prices affected the Corporation’s customers negatively.
Revenue for the three month period was $3,273,213 (2017 - $2,991,706) a $281,507, 9% increase, and the Corporation returned to profitability with net comprehensive income for three month period ended January 31, 2018 of $552,815 (2017 - $198,221) a $354,594, 179% favourable variance. The results reflect the previously reported turnaround from increased demand with sales remaining strong.
During the quarter, Southern Coal experienced a further increase in demand from its customers, in comparison to that of Q4, 2017 and the Corporation can confirm that Q2, 2018 will reflect a further increase to Southern Coal’s maximum capacity.
The Corporation also remains focused on completing a Broad-Based Black Economic Empowerment (“B-BBEE”) transaction for Southern Coal, by mid-June 2018. The B-BBEE is a form of economic empowerment initiated by the South African government with the goal to distribute wealth across as broad a spectrum of previously disadvantaged South African society as possible. A new partner has been identified and initial terms of the agreement, which will remain much the same as the previously agreed transaction, will most probably be announced by the end of April 2018. The Corporation remains confident that it will achieve its B-BBEE goals during the current fiscal year and we remain optimistic of the opportunities that will arise from such a transaction.
The Corporation reported net income o f $187,126 (2017 - $197,691) a $10,565 unfavourable variance of over the previous period. The reduction in GM and profit are due to increased feedstock costs in Q1 and a one month delay in the corresponding sale price increase, a general increase in maintenance cost and investment into B-BBEE training projects in Q1 which represent approximately 75% of the projected annual spend for B-BBEE
The Corporation has an agreement to lease premises for its coal processing plant in South Africa for a term of ten years, expiring on December 31, 2020. The agreement offers the Corporation, in lieu of rent, feedstock coal to be delivered to its adjacent premises, which it purchases at market price. Should the Corporation decide to purchase feedstock coal from an alternative supplier which the lessor is otherwise able to provide, then a monthly rent of Rand 200,000 ($16,819) is payable. To date, the Corporation has not been required to pay any rent for the premises as it has continued to purchase feedstock coal from the landlord.
The bank loan bears interest at 10.25% per annum, matures on January 7, 2019, and is secured by the Company’s furnace acquired with the proceeds from the loan. The bank loan is repayable in blended monthly payments of Rand 391,624 ($32,934 translated at January 31, 2018 exchange rate)). During the three month period ended January 31, 2018, the Company incurred interest expense totaling $Nil (January 31, 2017 – $15,322).