At the end of the Day, GNC's profit is based on Volume. 2010 will be a VERY POOR YEAR for GNC.
My current view on GNC is a STRONG SELL for the following reasons:
1. Their receivals are down from 9.8mmt last year to 6.2mmt this year (Sorghum not expected to amount to much, maybe push this upto 7mmt)
2. Have you seen their shipping stem so far. Almost nothing in Victoria. Melbourne their competition is almost full. Shipping volumes where their major reason for last years good result this will not be acheived in 2010.
3. The World malt market is massively oversupplied. OK they do have long term contracts with some major malters, but this only pays the fixed costs, the blue sky sales are what in the past has the big margins, This is likely to be non-existant in 2010. Remember this was an asset NO-ONE wanted.
I agree with Investor their assets and underlying business is better and more valuable than ABB, but Exports Volumes count for a lot with them. ABB has Guaranteed Export Surplus every year, GNC is very variable in surplus to is not likely to attract ABB Multiples.
FWIW Viterra pay WAY TOO MUCH for ABB. $2B EV for them is far too much when they could have re-build the entire assets of ABB for around $1.2B.
GNC Price at posting:
$6.26 Sentiment: ST Sell Disclosure: Not Held
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