I have held this stock for about 18months now and it must be the most frustrating one I have ever held ! I understand the specialty chemical market very well and I truly believe that the company is getting better every day. However, whilst I don't trust the motives of some of the downrampers of this stock here,the point about they make about the poor margins in this latest report seem valid.
The reports states:
"The group’s net loss for the period, $5,806,993 down from $9,008,753 for the half-year ended 31 December 2015, is related to increased sales revenue and improved margins on customer orders".
It is clear if you read the P&L that the net loss decreased only because share based payments dropped by $3.3M not because margins increased. The margins shocked me...on $11M sales they made only $111k margin. This does not gel with their comments about growing margins to 30% or 40%. I used to trust management at Alexium and believe what they said ...but too often they have let us down and not delivered. These comments about growing margins seem to literally not be true.
Knowing this type of business like I do I don't believe the problem is " their production processes or tolling fees". Selling prices and raw material pricing would have a much greater impact on their margins in this game. The fact that Alexium has "turned on" new tollers on a regular basis seems to indicate that this is simple blending or at least relatively simple reaction chemistry so I doubt major production problems are occurring. Unfortunately many base chemical raw material prices are on the rise. If Alexium cannot get their selling prices up or negotiate better raw material pricing, there results will remain ugly like they are now.
I hold because I hope, and I am too far in the red to give up now.... and the top line growth is impressive. I believe they can turn this company into something special but right now it looks a bit shaky ( at least in my eyes)
Sentiment changed from Buy to Hold today
(20min delay)