The cash conversion(EBITDA to OCF) at 46% was poor, I don't accept the KI excuse or the story that increased volumes had increased receivables.
The reason I sold however was the increase in debt. If you take a view of the balance sheet the increase in debt over the last two years exceeds the increase in PP&E and cash. This shows that not only has the debt been used for Growth Capex but it is funding aspects of the everyday business.
Debt to Equity at 70% is just too high IMO. Now they are looking to contribute to more Capex to the Pilbara joint venture.
Organic growth is great but it needs to be at least partly funded from free cash flow.
ORI Price at posting:
$26.34 Sentiment: Sell Disclosure: Not Held
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