I see you, too, enjoy a good Alluvial read ;) This excellent article from Mallard, convinced me I didn't know enough to hold the company confidently. Hope this helps.
It's not very clear from management disclosures. We just know contracts can be adjusted at a faster pace than before, up or down, for commodity prices. You can see today at the market reaction that their ability to pass on cost increases is higher than previously expected. There were fears of steep margin declines and management just said it would be the opposite.
Yes, this is what I thought originally, but I haven't found a way to actually know this for sure except for the good words of management. The risk reward didn't look so attractive anymore, or at least I can't handicap for this.
One thing that makes me also doubt their market power is that the market structure hasn't really changed since the last 10 years, sure a few competitors went bankrupt, but I don't think that's enough consolidation to really shifts the balance of power between supplier and supermarket.
what had been the reason (probably taxes?) for that and why it has been discontinued?
"instead it issued non-cumulative redeemable preference shares (“B shares”), which shareholders could then choose to redeem for cash; this is mostly what we can see in the above “share repurchases” line item'
I don't know. It's a decision that was made in 2011 and I can't find back the original justification. My guess though is they did that in the hopes the shares wouldn't be redeemed, to retain cash. So, happy that was discontinued.
I see you, too, enjoy a good Alluvial read ;) This excellent article from Mallard, convinced me I didn't know enough to hold the company confidently. Hope this helps.
https://substack.com/home/post/p-152554770
Thank you! Very good article. How did you find it?
My thesis is that McBride should now be better able to pass on cost increases; if that's not correct then indeed there's a problem...
is there any cap or anyu other "special" terms/requirements, for when pass on cost increases do (not) apply?
It's not very clear from management disclosures. We just know contracts can be adjusted at a faster pace than before, up or down, for commodity prices. You can see today at the market reaction that their ability to pass on cost increases is higher than previously expected. There were fears of steep margin declines and management just said it would be the opposite.
Andy was kind enough to share it on twitter.
Yes, this is what I thought originally, but I haven't found a way to actually know this for sure except for the good words of management. The risk reward didn't look so attractive anymore, or at least I can't handicap for this.
One thing that makes me also doubt their market power is that the market structure hasn't really changed since the last 10 years, sure a few competitors went bankrupt, but I don't think that's enough consolidation to really shifts the balance of power between supplier and supermarket.
what had been the reason (probably taxes?) for that and why it has been discontinued?
"instead it issued non-cumulative redeemable preference shares (“B shares”), which shareholders could then choose to redeem for cash; this is mostly what we can see in the above “share repurchases” line item'
I don't know. It's a decision that was made in 2011 and I can't find back the original justification. My guess though is they did that in the hopes the shares wouldn't be redeemed, to retain cash. So, happy that was discontinued.