Key highlights
- Rainfall at the start of the crushing season hampered volumes
- Revenues up, but profits down for the half
- Company forecasts a small full year profit
- MSL remains fair relative value for investors seeking a high fixed return
MSL reported a $37m profit for the half year to November 2013, a decrease of 10% from the corresponding 2012 period despite higher revenues of $299.5m (up from $287.1m). The result was significantly affected by rainfall at the start of the crushing season in the Mackay district resulting in lower season cane volumes (down 12%) which was partially offset by better sugar content. The much smaller Mossman operation improved volumes from last year. Revenues were also negatively affected by the sugar price – down 6.2% from the prior comparable period at AUD412.68 per tonne.
Due to the seasonality of revenues, with the vast majority of the revenues booked in the first half of the financial year but expenses spread out over the full financial year (including plant maintenance), the second half will achieve a loss. However, management forecast a full year profit of $5.4m for the 2014 financial year (down from $16.3m profit in FY13).
The company retained significant cash at bank at the half year end ($51.4m up from $20.5m) and retains a very strong net assets position of $311.9m. Gearing remains relatively low at 36.5% (Debt / Debt + Equity) and cash flows from operations improved compared to the first half of FY13; $71.8m vs $50.4m
Mackay Sugar remains the most ‘asset heavy’ company of any of our FIIG originated bond deals and the company’s fixed rate bonds are offering investors the opportunity to earn a strong fixed rate return whilst diversifying their investment into a sector with limited opportunities for exposure in either a fixed income or equity investment.
All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities.