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Century Global Commodities Corp: THE INVESTMENT CASE

Century Global Commodities gaining traction in Chinese food market

The final three months of the year continued a healthy revenue growth trend for the nascent food distribution business
In parallel with the development of the Hong Kong food business, Century established a start-up operation in Wuhan in China

Holding company Century Global Commodities Corporation (TSE:CNT) ended the third quarter of its financial year with more than C$30mln in cash and receivables.

The first three quarters of its fiscal year (which runs to end-March) have seen encouraging incremental results as the company executes its corporate strategy.

That strategy entailed diversification away from its iron ore mine development roots into food distribution.

Not that it has forgotten its iron ore assets, with work continuing to optimize the Joyce Lake direct shipping ore (DSO) project since the feasibility study was completed, with the aim of further improving the capital and operating costs.

The iron ore price has moved in the company’s favor, and management said in its commentary surrounding its third quarter results that the price is now at a level where the project could achieve an attractive operating margin.

“The key, of course, is the sustainability of the current price. The capital markets must be convinced that these iron ore prices are sustainable and capable of providing a return on investment, before it will consider funding Joyce Lake or similar iron ore projects,” the company said.

Meanwhile, while awaiting the iron ore market recovery, Century continued to analyze and track companies, primarily in the precious and base metal space, for potential investment and merger and acquisition (M&A) opportunities.

Regrettably, none of the potential candidates passed muster.

Necessarily, focus has been more on the food distribution business in China.

The final three months of the year continued a healthy revenue growth trend by category, product range and customer base, with sales revenue growing by around 20% from the second quarter, delivering a gross margin of some 20%.

On a year-to-date basis, sales for the three quarters reached C$899,793 delivering a margin of around 26%.

For the third quarter alone, Century’s revenues clocked in at C$419,321.

As with almost all nascent businesses, the company is currently loss-making, with the net loss for the fiscal third quarter narrowing to C$1.98mln from C$5.17mln the year before, reflecting a drastic cut in administrative costs to C$1.72mln from C$4.94mln.

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Century Global Commodities Corp Timeline

February 18 2014

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