RE:RE:Verde raises prices againICT1111 wrote: Underwhelmed by the volume sold, happy with the price but I would prefer the company to be taking market share and not constantly putting its price up. CV has argued that farmers are slow to change their practices; give them a price reason now to switch and they might not go back.
At first glance the Q2 numbers don't add up.
Hello ICT1111,
I heartily agree that at this early point in its development, teh Company would generate superior long term returns by maximizing the volume being consumed by end users, rather than pushing up the price. Q2 hit 96,223 tonnes sold, which is 53,777 tonnes under their current stated quarterly capacity. I would have been happier to see Q2 sales at 150,000 tonnes, and an average selling price lower than the $55.86 actually achieved (but better than the $35.01 average per tonne in Q2 2020).
That being said, if the Company could sell 300,000 tonnes at $40 in Q3, there is little to be gained by pricing at this lower level - we can only supply 150,000 tonnes until the new Plant comes on stream in 2022. In this circumstance, I have no problem with the Company jacking up prices to maximize the revenue on the 150,000 tonnes we actually have available to sell - keep raising spot prices until you sell exactly 150,000 tonnes.
I did note that the inventory figures were up significantly at the end of Q2 (at $727,000) compared with the figure at June 30 2020 ($567,000) and at March 31, 2021 ($510,000). Given we had excess production capacity in Q2 (53,777 tonnes) and expected to hit capacity in Q3, perhaps the processing plant ran excess production to build a bigger finished goods inventory stockpile to meet the anticipated demand. It would be great to see overall Q3 sales at something in excess of the plant capacity to demonstrate management had taken this sensible approach, even if it were only an addition 10,000 tonnes.
I guess we will have to wait until the Q3 results are released in November to see if this was in fact the case.
All the best.
S.