Quote Originally Posted by OneUp View Post
TLA

From memory you picked somewhere around $14m NPAT a long while back? That's been pretty accurate.

And I replied that if so I thought ATR was heading to $1.50.

I think if not for the sale agreement ATR might be trading at those levels today (where my buy order would be lurking!).

The missed profit forecast raises the question of how much you can trust this management team with large amounts of cash.
Yeah, It looks like the second half was an improvement over the first half as from memory some writebacks contributed to 1st half profit. Next year should see a large improvement in profit for the business as the effects of the massive increase in inventories (zircon stockpiles bought from MAL and CNM at discounted prices) are felt, although in the short term this has led to a large cash outflow.

I haven't really looked at the accounts too closely as they are pretty much irrelevant regarding the future of the stock due to the sale (except to the extent of the EBITDA earnout portion of the purchase price).

Management should be able to succeed in starting a new business again, but that's too much risk for me. Maybe I'll have another look in a few years.

I still think the factors impacting the business are largely short term - a result of ATR not having/wanting access to cheap Indonesian zircon due to its supply agreements elsewhere. Also, because those supplies have resulted in the zircon sand market in China being oversupplied.

When I first invested in ATR I did not fully appreciate how much money ATR made from merely importing raw zircon sand, and distributing it. The profits in 2004 and 2005 largely resulted from ATR buying cheap zircon concentrates from The Gambia, processing them, and selling the sand into the Chinese market. The high margins of those years were the result of those cheaper imports than buying sand direct from the miner/processors.

The following years were a return to normal (no more cheap concentrates from The Gambian gold mine tailings dump), plus the impact of other Chinese companies following ATR's lead and getting their own cheap tailings dump zircon from Indonesia. As a result ATR's margins suffered more pressure.

I think with new supply agreements with MAL and CNM, ATR's Chinese businesses' margins should improve next year, and with organic growth in revenues should deliver better profits.

The supply agreements haven't really had the opportunity to take effect yet, but should be felt next year.