RE:On the plus sideHigher paper and print costs. There is a YouTube video which shows the manufacturing plant, these are specialized large printers. I imagine they use high quality paper and ink.
They also experienced some work process inefficiencies, resulting in higher labour and material costs.
From Q4:
Despite the increased demand for our instant tickets, our results in this area, particularly in the last half of 2021, have fallen short of our expectations.
- Due to timing differences, our mix of products produced and sold over the last six months of 2021 included a larger proportion of lower value work.
- We have suffered some inefficiencies in our manufacturing operations leading to lower volumes and higher costs.
- As a result of stresses placed on our supply chains, delayed shipments and delayed access to the required inputs, as well as increased challenges of staffing to meet the increased demand in our manufacturing operations, our manufacturing operations had lower volumes and higher costs.
- During the last two quarters, and particularly Q4 of 2021, we have experienced significant inflationary price increases in our key inputs into instant ticket production, including higher costs on paper, ink and other supplies. The direct impact on our 2021 financial results was partly mitigated due to lower price inventory already on hand, but these higher input costs have placed significant pressure on our instant ticket margins. The expectation is that these higher priced inputs will continue through 2022 and are difficult to pass through to customers, in the short term, given the fixed price nature of many of our customer contracts."