Post by
dosperros on Dec 16, 2020 3:13pm
An anecdote -- supporting return of capital
I've commented before about business people vs. forestry people in leadership roles. One possible source of daylight is in ideas like "efficient" vs. inefficient" balance sheets. We know that debt is a lower cost of capital than equity, so some debt is good. It's not always intuitive though. I mean this directive should come from the BOD, but the quality of these boards deos vary widely in the indsustry.
The anecdote is that in a past CFP call the BMO guy was pushing them on this. The Canfor guys were not having it. They don't like that term, and don't view hoards of cash on the balance sheet as bad. Mark Wilde kept pushing them on their inefficient balance sheet and they just dig in and reiterate the shareholders get zero, and mgmt will keep the cash in a personal warchest for their own purposes. You might say 'cash is good they bought Vida' but look at WFT that does a better job of this -- they take out OSB in an all-equity deal. That's way better.
So, CFF is a bit more business focused. I'd be surprised if Ken aspires to get much beyond debt free. Building up cash on the balance sheet makes little sense. That siad, like we all tend to agree on, they should articulate a vision here.
So, speculation and conjecture on my part, but in cases like this you generally benefit from folks who have business training vs. just lumberjacks made good. I'm both, so I see it both ways -- not a jab at anyone just how things tend to play out. CFF could be debt free very soon if pricing holds. Then I hope we'll see a div on top of the NCIB.