Take a look at this shit: Release 3Q11
They start the release with this big achievement:
MAGNESITA REGISTRA FLUXO DE CAIXA OPERACIONAL DE
R$ 461 MILHÕES, RECORDE NO ACUMULADO DO ANO, E LUCRO
LÍQUIDO 12% SUPERIOR AO DO 2T11
Let's see the 2011 acumulated Cash Flow Statement at page 21.
It starts with net earnings and add some adjustments, as usual.
Then things start to get interesting:
1) They added 63.116 of judicial litigation received - that's ok for a cash flow statement, but doesn't justify all the cheers about the CFO, because it's NONRECURRENT.
2) They added more 48.883 of asset sales - shouldn't this be cash from investiments? This is obviously NONRECURRENT and probably NONOPERATIONAL
3) They added 119.321 of the increase in accounts payable (Fornecedores e empreiteiros). This is also NONRECURRENT.
Subtracting all those NONRECURRENTS the CFO would be only 229,68 millions. It's just a 50% difference from the headline!
I looked for any comments about the CFO but they just cheered about their great accomplishment.
Sunday, December 18, 2011
Magnesita's 3Q11 Cash from Operations = deception
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3 comments:
I fully agree. Besides of what you've commented, they also added back 132 mi of charges and monetary/exchange variations. Part of that amount is interest not paid, but that is cleary an expense that will have to be paid soon.
So I beleive cash flow is, for 9M11, earnings (87) + depreciation (77) - lawsuit (63) - asset sale (49) = 52.
Yes, a shit.
By the way, one final word:
Magnesita is another heavy bet of Fama that I don't like.
But Fama is down -19%, Orbe is down -21.5% and I'm getting +15.6% so far this year.
So it does pays to be contrarian on them.
In fact, adding back 30 mi of exchange variations and taking just 35 mi for suppliers gain (120 mi is clearly not sustainable), I get a net cash provided from operating activities of 160 mi in 2011 (annualized 9M11/3*4). That is rough 10% of current market value.
Of course, we have to deduct investments, then FCF would be about 100 mi (6%).
I prefer to invest in GGBR/CSNA instead.
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