Why is it that when companies list on the ASX they suddenly feel invincible? All the rules followed when they were private such as; careful financial management, viewing any commercial contract as risky, not banking on perfect scenarios, and most importantly - not viewing their bank balance as something that can be topped up by shareholders whenever it's needed, are out the window. They're like armies that out run their supply lines because they believe they will conquer new territory before they starve and run out of fuel.
TSN first listed with a core business. They were the final processor of hemp seed products grown by farmers from TSN (APH) licensed and supplied seed and wholesaled to more specialised end product manufactures with recognisable names and retail links. They needed capital to buy themselves better, more efficient and higher volume equipment to exploit that - they told us.
I got a little un-nerved when they started pouring cash into direct to customer online retail. That can be done if you have a spare $20m to market and get brand recognition, or if your day to day costs are so small you can build slowly. Neither apply to TSN. I've no doubt the product is fine and isn't the problem.
I've managed engineering companies without a break since 1991. The consistent problem I faced was owners wanting to cut out the middle man, as they called them. The trouble is, manufactures have an entirely different mind-set to retailers and raw material suppliers.
Coles sell milk, but they don't have cows in the carpark. Farmers sell milk, but they don't buy the dairy and retail outlets. There are occasions when that needs to happen, but it takes a lot of cash and a rock solid plan.
I do hope this isn't the cluster f@ck a 5 week suspension and CEO resignation suggests, but it's hard to see it any other way.
Good luck and stay safe,
Cake.
TSN Price at posting:
14.0¢ Sentiment: None Disclosure: Held
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