Canaf Group Inc.(CAF.V) Q3 2018 Results. Financials + MD&A Ending July 31st 2018. All information can be found at www.sedar.com
TSXV Symbol: CAF - OCTBB Symbol: CAFZF
Price: $0.11 Common Shares: 47,426,195 Insider Holdings: 12,304,085 or 26% - Majority Owned By CEO & Family Warrants/Options: 0 Website: www.canafgroup.com
Financials (All In US Dollars)
ASSETS Cash: $1,252,240 Trade Receivables: $1,682,075 Sales Tax Receivable: $20,078 Inventories: $685,983 Prepaid Expenses: $25,496 Property & Equipment: $808,845 Intangible: $1 Total Assets: $4,474,719
LIABILITIES Trade Payables: $1,684,853 Sales Tax Payable: -$859 Income Tax Payable: $72,029 Current Portion Of Bank Loan: $174,801 - Due Jan 2019 Total Liabilities: $1,930,824
Q1-Q3 Performance Sales: $12,137,604 Gross Profit: $933,187 G&A Expenses: ($444,535) Interest Income: $53,645 Income Tax Expense: ($26,192) Foreign Currency Gain: $119,153 Net Income For 2018: $635,257
Management Discussion & Highlights
OVERALL PERFORMANCE AND OUTLOOK
Revenues for the nine months were $12,137,604 (2017 - $8,443,667) a 43.7% increase, and the Corporation continues to be profitable with gross profits of $933,187 (2017 - $889,225) a 4.9% increase and net income for nine month period ended July 31, 2018 of $516,105 (2017 - $595,716) a 13% reduction. While revenues and gross margin have grown, increased cost of sales produced smaller gross margin percentages, 2018 7.7% (2017 10.5 %). The reduction in the gross margin is mainly due to major maintenance and re-commissioning costs during the period as well as various one off costs.
The Corporation expects to continue to operate profitably into Q4, however Revenue is expected to reduce slightly as demand for calcine reduces slightly due to a slowing in manganese and steel production downstream of the supply chain. The Corporation cannot be sure of how long this slight reduction in demand will continue for, however remains confident that Southern Coal will continue to operate profitably as it continues to work with a potential new customer with the intention to secure a new long-term supply contract.
Whilst continuing to ensure that Southern Coal continues to generate free cash flow, the Corporation is also actively exploring new opportunities in South Africa and its neighbours, as it accumulates cash and reduces its gearing; from January 2019 Southern Coal will have completed the repayment of the 14 million Rand loan with ABSA which will add approximately $26,000 per month to its cash-flow.
The Corporation’s B-BBEE transaction for the sale of 30% of Quantum’s shares in Southern Coal for 18 million Rand was completed during the quarter. This marks a significant milestone in the strategic plan to bring Southern Coal’s BBBEE rating in line with its existing and potential new customers’ requirements. The revised effective date for the transaction is 01 August 2018.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION (B-BBEE)
As part of Southern Coal’s B-BBEE transformation program, Amandla Amakhulu (Pty) Ltd., (“AAM”), a 100% black, privately owned, and ringfenced, company incorporated in South Africa, acquired 30% of the issued shares of Southern Coal, from Canaf’s wholly owned subsidiary, Quantum, for the value of 18 million Rand. The revised effective date for the transaction is 01 August 2018.
Quantum in return received cumulative, redeemable preference shares in AAM in the amount of the purchase price. These preference shares shall provide preferential dividends, until redeemed by AAM. These dividends will be secured by an irrevocable direction from AAM to Southern Coal to pay Quantum such dividends from any distribution to AAM.
CLAIM AGAINST KILEMBE MINES LIMITED
In August 2006, Canaf, then known as Uganda Gold Mining, announced the termination of any further investment into its Kilembe Copper-Cobalt Project in Uganda. Since 2007, the Corporation has been engaged in an arbitration with Kilembe Mines Limited, (“KML”), whereby the Corporation seeks general damages, special damages and costs of the arbitration from KML for breach of contract.
The legal work, carried out by MMAKS Advocates, Kampala, against KML is at no cost to the Corporation, but any award in won by MMAKS efforts will be distributed to both MMAKS and Canaf.
Despite the fact that the claim against KML Corporation remains active, the Corporation is unable to give an indication of either the quantum or any likely date by which the arbitration will be concluded.
Sales
Revenue for the nine months was $12,137,604 (2017 - $8,443,667), 44% increase due to high demand for Southern Coal's calcine product from both of its main customers, particularly in Q2. The Corporation is confident that Sales will remain at profitable levels in to Q4, however expects to see a slight reduction in comparison to Q3, as demand falls off slightly.
Expenses
Expenses for the nine months were $444,535 (2017 - $237,288) an increase of $89,286, 25%, primarily due to increased costs relating to the B-BBEE program and major maintenance costs on Southern Coal’s old calcining facilities. Other one off expenses that were incurred during the period were legal costs relating to the Corporation’s name change, as well as back dated rent for Southern Coal’s premises which were negotiated at approximately $20,000. General administrative and finance expenses for the nine month period were $418,788 (July 31, 2017 - $312,829) an unfavorable variance of $105,959, primarily due to increased involvement in South Africa’s B-BBEE program and increased activity resulting in higher management fees and office expenses. The Corporation incurred extra management and consultant fees due to the passing of its previous CFO, Zeny Manalo as well as transitional costs associated with the resignation and appointment of its CFO during the year. The Corporation does not expect any further extra ordinary management or consultant fees going forward.
Comprehensive Income
The Corporation is not subject to currency fluctuations in its core activities however the Corporation is subject to transactions in various currencies and the volatility in international currency markets does have an impact on some costs and the translation into US$ the reporting currency of the Corporation. The current period comprehensive gain on foreign exchange in the amount of $119,153 (2017 - $27,014) is primarily as a result of the translation into US$ the reporting currency. As at July 31, 2018 the Corporation has net comprehensive gain of $635,257 (July 31, 2017 - $622,730.) The Corporation does not hedge net asset translation movements.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 2018, the Corporation had cash of $1,252,240 (October 31, 2017 - $453,609) and working capital of $1,735,049 (October 31, 2017 - $1,098,726). Surplus cash and cash equivalents are deposited in interest accruing accounts.
Working capital components include cash in current or interest bearing accounts, trade and other receivables, sales tax receivable, inventories and prepaid expenses and deposits, trade and other payables, sales tax payable, income tax payable, and current portion of long-term debt.
Trade receivables and trade payables are expected to increase or decrease as sales volumes change.
Reply to Jimjones1972 - Msg #6217 - 09/26/2018 10:31
Canaf Investments earns $635,257 (U.S.) in nine months
2018-09-26 07:15 MT - News Release
Mr. Christopher Way reports
CANAF ANNOUNCES FINANCIAL RESULTS FOR Q3 2018
Canaf Investments Inc., formerly known as Canaf Group Inc., has released its financial statements and management discussion and analysis for the nine-month period ended July 31, 2018.
Revenue for the nine-month period ended July 31, 2018, increased to $12,137,604 (U.S.), an increase of 43.7 per cent compared with the same period last fiscal year, which generated a net comprehensive income of $635,257 (U.S.) (2017: $622,730 (U.S.)).
For more details and discussion on the results, the financial statements and management discussion and analysis can be viewed on SEDAR or the corporation's website.
About Canaf Investments Inc.
Canaf is a public company listed on the TSX Venture Exchange. Canaf's head office is in Vancouver, Canada, with subsidiary offices in the United Kingdom and South Africa. Canaf owns 100 per cent of Quantum Screening and Crushing, a South African-based company that owns 70 per cent of Southern Coal.
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