Consolidated Bakery, better known as Purity, recorded a major improvement in profits from their ill-fated 2012 results. Buoyed by a 41 percent sales increase, the company ended the year with profits of $33 million or just 15 cents per share. Unfortunately for the initial IPO investors, the results although sharply improved, is yet to reach a level that would see the stock reaching its public issue price in the short term.
Results showed impressive quarterly growth, with the first quarter rising 172 percent, followed by 212 percent in the second quarter, 328 percent in the third quarter and 231 percent in the final quarter. Although sales climbed the fastest in last quarter by 52 percent, it resulted in only $2.7 million in profit. Revenues in the first two quarters averaged 32 percent and the third quarter climbed by 51 percent. Growth in revenues is helped by a number of new products the company launched in the past two years.
Gross profit | Gross profit margin improved in the year to reached 54 percent from 52.7 percent in 2012, still lagging gross profit of 62 percent in 2011.
Cost rose sharply in the year with administrative expenses climbing 23.5 percent to reach $123 million, an increase of $23 million and selling and distribution moving up by $23 million or 43 percent, a bit faster than the increase in revenues.
The company has work to do to improve what is a paltry return on equity of 7 percent even as the results exclude the payment of corporate taxes. The stock price to net asset value is only 50 percent and with the PE ratio is at 7 times last year’s earnings, which is at the upper end of valuation for junior market companies. Investors should not see much improvement here until new and improved results starts coming.
Borrowed funds that were at $40 million at the end of 2012 is up to $71 million but is at a very comfortable level with equity at $504 million. Cash funds available amount to $110 million at the end of 2013.
Watch this one | The company has room to grow faster than the economy for a while and this could make it a good growth prospects for investors looking long term. IC Insider’s forecast is 27 cents per share for 2014, suggesting that the price should be moving up from the current $1.10 level during the course of the year.
Tightness in the local economy, to which the company’s fortunes are predominantly tied, can negatively affect sales and cash flow. They seem to have navigated a tough 2013 unscathed and should be able to do well in 2014, which ought not be as challenging as last year. However, the pressures of last year could well weaken many of the company’s customers with the evidence showing up later. So far, that don’t seem to be the case and the next set of results due by mid-May will point to where the wind is blowing.
Related posts | Big profit jump at Purity | Consolidated Bakeries hiked profit
[…] price at $1.15 on the junior market, it boasts a PE of 5.7 and has a net asset value of $2.42. Consolidated Bakeries that produces and markets baked products such as breads, buns, crackers and cookies has equity of […]