RE:Capacity now for new customers as targeted 1. Given the inventory level at the end of Q4 2023 - combined with the Q1 typically being the best quarter - we should logically be expecting a HUGE Q1 2023. Likely the biggest ever. In order to sustain 10% annual growth for 2023 what does Q1 success look like? Q3 & Q4 in a given year typically drop-off relative to annual growth so, in any given year with 10% growth, you can have Q1-Q4 growth of 12%-12%-9%-7% to average at 10% for the year.
2. As I understand it, this is the first year where Gilles has directed staff to produce extra inventory - so much inventory in fact that there is sufficient inventory to carry Ceapro into 2024.
QUESTIONS:
Carry Ceapro into 2024 at what sales rate?
10% Annual growth?
20% Annual growth?
Based on the decision to build up inventories, he knows this answer NOW.
3. Gilles is a genius and is such a competent CEO that he knew in 2nd half of last year that growth in 2023 would significantly exceed 2022 growth of 10% year on year... HIGHLY doubtful. However, that is what he is implying by not providing an explanation as to why he directed inventories to be built up as at the end of Q4 2022. Q1 was the first three months of this year and we are nearly 3 weeks past the end of the quarter... he knows now.
4. 2022 Financial Statements Note 2(f) "Inventories are valued at the lower of cost and net realizable value."
If sales fall short in Q1 (short of... 12% say... Q1=10% growth then), what is the risk to the inventories value? Ceapro will have to sell even more in the ensuing Q2-Q3-Q4 to hit just 10% growth, never mind to sell the now over produced inventory. Historically, sales have dropped in the second half of the year. This would relistically leave Q2 to make up for the loss in growth... not to mention the even higher than 10% expected growth year on year as implied by the inventory build-up. So, ceteris paribus, Q2 sales would have to hit 14% year on year growth just for the year to come in at 10% growth!!
5. There are only two scenarios: Gilles is a genius and should remain OR this the end of the road for him.
I know what I am smelling.
SCENARIO 1 - Crazy growth, Q1 15%:
Reflect on the 12%-12%-9%-7% to hit 10% year on year growth.
To hit 10.8% year on year growth... which is really a rounding error, the Qs would have to be 15%-12%-9%-7%.
So what does Q1 2023 success look like in order to justify the inventory build up? I posit a lot MORE THAN 15% year on year Q1 growth.
SCENARIO 2 - Q1 10% growth:
Sales come in at 10% Q1 year on year growth. Logically, nay, mathematically, sales below 10% in Q1 indicate 10% year on year growth will be well below 10% in December.
So why were inventories built up? What is the risk to the inventory value on the balance sheet? Why did the CEO build the inventories up?
Gilles will say Q2 will be the savior. Refer to (4) above.
Take this as you wish... no name calling... straight analysis of what is there. Mr. Gagnon cannot have it both ways.
Numbers don't lie, people do.