Hi everyone, wanted to share some thoughts on ANO's current...

Hi everyone, wanted to share some thoughts on ANO's current outlook.

I spoke with Rade (chairman) a few days ago to get some answers to questions I had specifically around the DOW distribution agreement.

DOW has recently started "destocking" product (not just from us, but across their entire supply chain) to reduce their held inventories. This caused a surprise loss of revenue in the US market for ZinClear-IM for the HY. (about $1.2m)

Antaria announced to the market that because of this, the agreement with DOW will be terminated "no later than April 2015" and that other arrangements will be made to sell the product in US.

The good news is the demand for ZinClear in the US is still strong, the product is still selling, albeit at DOW’s inflated pricing to their sub-distributors.

There are a few things to understand about this.

Firstly, DOW only have enough stock of ZinClear-IM left to last them to about September, so something will have to happen by then.

Even better, once the distribution agreement is terminated, Antaria has already developed relationships with DOW’s current customers in preparation for cutting out the middle man and transitioning to sell directly to them. These are not new customers, they are already buying the product, just from DOW instead of Antaria.

The most important bit, ANO has initiated proceedings for earlier termination. As I understand, this request was submitted at the same time as the release of the HY report (26th Feb). If DOW do not contest this and 30 days pass, by March 27th we are able to start selling direct to these existing customers.

There are significant benefits to our own distribution model. DOW have been putting a 100%+ markup on ZinClear-IM to sell to its customers, so when Antaria step in, we can provide better pricing while also increasing our own revenue generated.

Additionally, we can offer a better shelf life of product, perhaps 6 months longer, as the product won’t sit in storage unnecessarily.

There are also some possibilities we could get compensation from DOW, but being realistic lets keep that as a nice prize if it happens. IMO the better news is that this could be resolved A LOT sooner than 2015, perhaps even by the end of the month, and we will see US market revenues return and even increase.

The company has done a lot of great work, for a $1.2m+ drop in revenue and only posting a loss of 120k, we could have done a lot worse. I’m confident that the US revenue will not only return, but increase substantially once we are back in control.

Think about it, if the DOW de-stocking didn’t happen we would have posted a very healthy profit for our market cap. What will happen when we increase our margins without DOW? Profits, dividends and growth.

Now’s the time to be getting in while we’re very cheap. Come next year we’ll be in a much stronger position regardless of when this DOW situation resolves. Probably posting over $3,000,000 in profits for the FY. Which is, over half our current market cap.