Sherritt International Corp T.S

Wowza

[rkhosla]

blow out quarter

[FCPlady]

Bit of a smoke and mirrors, IMO.  The numbers look good until you read them more closely. $1,100/tonne fertilizer prices gave cover to a few problems.  They lost 600 tonnes of nickel sales and 150 tonnes of cobalt sales. That's about $36M of lost revenue.  Goes to show how dependent they are on China for sales.   Would like to hear how they're diversifying

[Contrarian333]

A financing?  No. Look at the inventory build at Moa from last Q (+$97m).  That inventory is now turning to sales/cash as per the commentary.  That cash will be available for distribution.  This is supported by their narrative of larger distributions in the second half of the year.  

[Ernieandbert]

And in fact, WC is up about $112mm at Moa since YE22.  S's share is $56mm of that WC.   Agreed, this will release in 2H22.  

[FCPlady]

Larger distributions when nickel prices have droped to $9.60/lb and cobalt prices have dropped to $25/bl?  I don't see it. The company will have to raise money or tap into their credit facility.  $25M of cash doesn't go as far as it use to.

[Ernieandbert]

If you are worried about Cuba needing hard cash and S needing the same for some reason because Ni and Co prcing is lower, why on earth would either JV Partner want to retain released WC as Cash sitting on the b/s of Moa not doing much of anything, when they are already sitting on $42mm of cash and a total of $555mm of WC of which 50% is to S?  At U$9.00 on Ni, S is still FCF positive. 

[FCPlady]

Back at ya.   You keep pumping how about how free cash the JV will generate and we only saw $15M in distributions in Q2.  S is trading at $0.40.  Do you still think it's worth more than $1? Hard to get excited after today's call.  NDCC in 2nd will be north of $6 and zero analysts asked questions.  S is orphaned.

[Ernieandbert]

It is orphaned...that is why at some point it will pop.  FCF can't be ignored and will drag in either buyers or a single buyer of the stock.   And with it trading under 2x, that extreme low valuation can't last forever before someone realizes it. 

[mas7575]

Where did the cash go? S generated enough fcf to cover the retirement of $60M of bonds (face value), a bit under $50M cost to the company, and still had cash left over. A very prudent move, IMO, as it will save $5.5M in interest cost/year while also reducing the LT liability due when bonds mature in coming years. mas75

[YourFriendo]

A good chunk of the cash for the buyback came from cash on hand (not generated this quater). Hence the drop in cash in Canada to just over 20 million. So it's important to note that the cash used was not all generated from cash earned in the quarter. Nonetheless, a good use of cash that was just sitting there providing no benefit to shareholders.

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[Ernieandbert]

I gave just Working Capital, which is Cash plus A/R plus Inventories less A/P.   But yes there is substantial Net Asset Value (most of S's value) in Moa.

[VerificateASAP]

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[VerificateASAP]

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