Q2 2014 MFC Industrial Ltd Earnings Call

Aug 14, 2014 AM EDT
MFCB - Mfc Bancorp Ltd
Q2 2014 MFC Industrial Ltd Earnings Call
Aug 14, 2014 / 02:00PM GMT 

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Corporate Participants
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   *  Kevin McGrath
      MFC Industrial - IR
   *  Gerardo Cortina
      MFC Industrial - President, CEO
   *  Sam Morrow
      MFC Industrial - CFO

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Conference Call Participants
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   *  Sven Carlin
      Wells Fargo Securities - Analyst
   *  Doug Weiss
      ESW Investment - Analyst
   *  Jeff Pluntik
      - Analyst
   *  George Burmann
      - Analyst
   *  Bernie Harris
      - Analyst

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Presentation
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Operator   [1]
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 Welcome to the MFC Industrial LTD Second Quarter Financial Results Conference Call. My name is [Lisa] and I will your operator for today.

 At this time all participants are in listen-only mode. Later we will conduct a question and answer session.

 (Operator Instructions).

 As a reminder, this conference is being recorded for replay purposes.

 I would now like to turn the conference over to your host for today, Mr. Kevin McGrath of Cameron Associates. Please proceed, sir.

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 Kevin McGrath,  MFC Industrial - IR   [2]
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 Thank you Lisa, and good morning everyone. We appreciate your interest in joining us on MFC's conference call and webcast to discuss financial results for the three and six month period ended June 30, 2014.

 On the call with me today are Gerardo Cortina, President and CEO, Sam Morrow, Chief Financial Officer and Rene Randall, Vice President.

 The Company will make a brief presentation on the results announced this morning and then open the call to questions.

 Today's call is being webcast on our website at mfcindustrial.com. Simply click on the tab in the webcast section to access the webcast. The webcast will be posted at mfcindustrial.com for replay approximately two hours following the end of the call. The replay will stay on the site for on-demand review for the next seven days.

 Certain statements in this conference call will be forward-looking statements, which reflect management's expectations regarding future growth, results of operation, performance and business prospects and opportunities.

 For detailed information about risks and uncertainties that could cause our actual results to differ materially from those expressed or implied, please refer to the disclaimer for forward-looking information contained in today's press release on file with the Canadian Securities Regulators and on Form 6-K with the SEC.

 With that said, now I would like to turn the call over to Gerardo to begin the discussion.

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 Gerardo Cortina,  MFC Industrial - President, CEO   [3]
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 Thank you Kevin. Good morning everybody. And thank you for being with us today.

 Today we're a materially different company than we were just six months ago. In March, we acquired Elsner and in April we acquired FESIL. These two additions increased substantially our trading revenues for geographic and product expense, increasing the scale of our global commodity supply chain business.

 Elsner is a global supply chain company focused on steel products which was founded in 1864 with its [head office in] Vienna.

 Elsner offerings includes a full range of steel products and has longstanding relationship with many steel mills, mainly in Europe and China. Elsner provides MFC with a solid customer base, an excellent portfolio and well respected management team which is already enhancing our global supply chain platform.

 FESIL is a vertical integrated commodity supply chain company with a ferrosilicon production facility in Norway and sales companies in Germany, Luxemburg, Spain, the US and China.

 The FESIL sales companies, besides ferrosilicon, they are active worldwide with a complete line of ferroalloys, metals minerals, and specialty products, servicing this steel and foundry industries. FESIL is a strategic acquisition that will add geographic reach, a diverse product portfolio, an established brand name, a well-respected management team and excellent employees to our global commodity supply-chain platform.

 With the FESIL and Elsner acquisitions, together with FESIL Mexico, MFC Energy, MFC Resources US and Argentina and our longstanding global commodity supply chain company in Vienna, MFC Commodities.

 Our commodity supply chain business is now active worldwide in a wide range of products and markets such as minerals, metals, alloys and chemicals, steel products, wood products, energy and plastics, we have global presence with offices strategically located that allow us to take advantage of opportunities in different parts of the world.

 On the sourcing side, China continues to be an important source for a wide range of products. With our two recent acquisitions we ended up with too many offices in China. We have consolidated them into two main offices in Beijing and Shanghai that service all group companies. Besides China we source globally through our network of our offices that again service all the different group companies.

 Now let me talk briefly about our results for the first quarter and six months ended June 30, 2014.

 Revenue for the second quarter reached $397 million versus $231 million in the first quarter, this represented 72% increase. For six months ended June 30, 2014, revenue reached $630 million compared to $376 million over the same period 2013 representing an increase of 67%. EBITDA for the second quarter reached $22 million versus $18 million over the same quarter 2014 and also $18 million during the second quarter 2013. This represents 22% increase.

 On Wabush, I just want to mention that we continue our discussion with stakeholders to rationalize this asset. We're concentrating our efforts and we continue to do so over the coming months on organic growth and improvement of our profitability.

 We're integrating our new acquisitions and focusing on revenue synergies throughout geographic customer and product cross selling. Once fully integrated, we will be able to capitalize on the many opportunities ahead of us.

 We have the people, we have the assets, we have substantial liquidity and longstanding relationships with supportive financial institutions. We have challenges but we have the right people in place to make sure those challenges are opportunities. Now it's time to execute. Thank you.

 Now I turn this to Sam, who will go into more detail on our financial results.

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 Sam Morrow,  MFC Industrial - CFO   [4]
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 Thanks so much Gerardo. So I would like to highlight some select financial information and then we'll head to Q&A. So in Q2 our revenue has more than doubled from the year ago period to $397 million mainly from the consolidation of FESIL and Elsner, but also with contributions from increased volumes of wood products and higher natural gas prices. Partially offsetting this we did not record any revenue from the Wabush mine during the second quarter.

 We will continue to invest in SG&A which was $26.6 million for the quarter up from $17.5 million in the year ago period. Again the increase is mainly due to FESIL and Elsner but we also had some restructuring and severance costs.

 We don't want to break out these numbers. Our goal is to grow book value per share, not pro forma book value per share and these were real costs which impacted our financial condition.

 On taxes, I would like to point out that off our $5.9 million tax expense in the first six months, only $1.8 million was cash, historically we have been a fiscally responsible company and we will strive to continue to be fiscally responsible going forward.

 Net income was $7.1 million in the second quarter versus $6.8 million in the second quarter of 2013 and EBITDA was $21.8 million versus $18.1 million in the year ago period.

 On to the balance sheet, our cash position and our balance sheet both remained strong as of June 30. Cash was down sequentially to a 184 million, the largest impact being the acquisition of FESIL but we also paid down certain short term borrowings before the end of the quarter. We're currently exploring the long term refinancing of some of this recent activity and we will update you shortly there.

 One area I think we can improve on is working capital management. Receivables were $208 million on June 30, up from $116 million at December 31st, 2013 and inventory was $206 million on June 30 up from $89 million at December 31st, 2013.

 Meanwhile our payables only increased $6 million to $133 million versus $127 million at the end of last year.

 So this will be a big area of focus and it's one place where I believe we can be much better. Our long term debt to equity ratio was 0.27 and we had more than $800 million of credit facilities at June 30, so a lots of liquidity, lots of flexibility. Shareholders' equity was $715 million versus $700 million at the end of the year. Book value per share was $11.33, up $0.15 since December 31.

 So two last items before we move on to Q&A. As Gerardo mentioned, we're currently in discussions with our stakeholders, with all stakeholders about the Wabush-Scully mine. However we're currently unable to comment beyond this on today's call so we appreciate your understanding with the Q&A.

 Secondly we're constantly trying to improve our communication with all of our stakeholders. This is our first report so we would appreciate any commentary and suggestions you may have going forward.

 And with that, operator we're ready to take your questions.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions).

 Your first question comes from the line of Sven Carlin. Please proceed.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [2]
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 Yes this is Sven Carlin. Good morning, Gerardo.

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 Gerardo Cortina,  MFC Industrial - President, CEO   [3]
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 Good morning.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [4]
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 My question has to do with your statement that you're looking at improving your working capital situation.

 Obviously you have potential both on receivables and inventories but my question would relate to your assets for sale category, we've seen a number there for a number of quarters now. Are those assets actually for sale or are they just categorized as such?

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 Sam Morrow,  MFC Industrial - CFO   [5]
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 Hey Sven, this is Sam.

 So the assets that we have for sale on our balance sheet mainly relate to our Niton property in Alberta and we're in active discussions there. No update.

 Certainly we will announce something the moment we have something in place, but they are certainly for sale just categorized as such.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [6]
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 Okay and my second question has to do with fully diluted share count. It looks to me like your fully diluted share count is down over 1 million from the end of the year, [63.8] down to [62.7]. Is that the expiration -- is that terminations of people basically who had options are no longer in the pool or is that vesting, people who used to be there and no longer are there? Does it have to do vesting? What is the reason for that drop of over 1 million shares and fully diluted? Because there is no share buyback going on so I --

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 Sam Morrow,  MFC Industrial - CFO   [7]
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 No. So there is no share buyback plan, that just has to do with the share price dropping and we use the treasury stock method for calculating diluted earnings per share. So that's going to be the biggest impact.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [8]
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 Okay, fine, thank you.

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Operator   [9]
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 (Operator Instructions).

 Your next question comes from the line of Doug Weiss. Please proceed.

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 Doug Weiss,  ESW Investment - Analyst   [10]
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 Hi good morning.

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 Sam Morrow,  MFC Industrial - CFO   [11]
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 Good morning.

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 Doug Weiss,  ESW Investment - Analyst   [12]
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 Can you hear me?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [13]
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 Yes, good morning.

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 Doug Weiss,  ESW Investment - Analyst   [14]
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 Morning.

 So you mentioned in the press release that you thought you could, there are costs you could cut as you can integrate acquisitions and I guess you also said that there were some onetime integration costs this quarter. Can you give a little more sense in terms of magnitude of, I don't need an exact number but just in terms of what the onetime costs are and what the additional opportunities are to cut cost on a combined basis, you know how large that could be?

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 Sam Morrow,  MFC Industrial - CFO   [15]
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 Yes Doug, so we would really prefer not to break out any one-time costs. Some of them are detailed in the 6-K. I would say that it was material or significant but when it comes to synergies, you know, we want to reinvest every penny of savings that we get from synergies just right back in the SG&A you know productive revenue generating SG&A. So there is some opportunity there certainly but we're going to reinvest all of those savings.

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 Doug Weiss,  ESW Investment - Analyst   [16]
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 Okay. I guess, so you would anticipate some top line benefit then from the reinvestment?

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 Sam Morrow,  MFC Industrial - CFO   [17]
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 Correct.

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 Doug Weiss,  ESW Investment - Analyst   [18]
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 I guess another way to think of it in terms of your EBITDA margin, I mean do you see sequential improvements in margin or are you just, it's too early to say or--?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [19]
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 That's what we're working on.

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 Doug Weiss,  ESW Investment - Analyst   [20]
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 Okay. All right, I'll just - I'll stay tuned. Thank.

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 Sam Morrow,  MFC Industrial - CFO   [21]
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 Thank you, Doug.

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Operator   [22]
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 Your next question comes from the line of [Jeff Pluntik]. Please proceed.

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 Jeff Pluntik,  - Analyst   [23]
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 Good morning, gentlemen. Maybe just stepping back and I have sort of watched the Company for a long time and maybe there has been a few gaps here and there but maybe you can just step back each of you as CEO and CFO, maybe talk about a little bit of your background and what you each sort of bring to the Company.

 Second question would be more of, close your eyes and what would this look like in three years, really what's the vision?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [24]
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 Thank you, Jeff. I have been in the trading business for the last 30 years. I have been working with FESIL in Mexico, then with ACC Resources in New Jersey and being mainly involved in trading on minerals, metals and alloys. Our focus, a global commodity supply chain company, and as we expressed in the press release all the recent acquisitions are in that direction.

 And for the coming months we have to integrate, we will work into integrating all these new acquisitions, and we see substantial benefits in geographic customer and product cross selling. We have already seen benefits over this last second quarter, some of our subsidiaries have been able to increase revenue.

 So we're optimistic about this, the way this integration has been going. Definitely we still have room to go. But we are positive that these will translate as we said, in improvement of our profitability.

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 Jeff Pluntik,  - Analyst   [25]
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 And where you're physically based? You personally.

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 Gerardo Cortina,  MFC Industrial - President, CEO   [26]
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 Right now we're in Vancouver, our head office is in Vancouver as you know and we will have a small office in New York and Sam and myself and our team will be based in New York.

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 Jeff Pluntik,  - Analyst   [27]
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 Okay got it, so you will be based in New York and how about our new CFO?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [28]
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 Sam? He is based in New York also.

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 Jeff Pluntik,  - Analyst   [29]
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 And your background - you know, I mean - I thought you were an [investor], I forgot...

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 Sam Morrow,  MFC Industrial - CFO   [30]
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 I was the -- our project leader for both FESIL and Elsner acquisitions at MFC.

 In my prior life I was an analyst on the buy side following MFC. And I think, this is a company I know quite well. I think together with Gerardo, we seem to make a pretty good team and we're aggressively pursuing growth and profitability in our future. And one thing I will say you, what you bring to the table.

 One piece of criticism that MFC has received in the past is transparency, and communication with our stakeholders and that's something that we're actively looking to improve. So I have been on the buy side, and I'm hoping to really contribute there. So any other comments, like we said, we appreciate your input.

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 Jeff Pluntik,  - Analyst   [31]
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 And where are you on the -- this has been a hodgepodge of lots of things that we do know and don't know and I mean have you kind of finalized the strategic plan to say obviously the trading business and its different subsidiaries seem to be the core.

 What about all the other stuff and I know you mentioned exploring the stakeholder [the mine], I get that. Notable companies in China, all the other stuff that's been dabbled in over the years, do you have any comment -- is that core -- is this part of a long term phase out, or what are you thinking?

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 Sam Morrow,  MFC Industrial - CFO   [32]
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 Our goal is to become a global vertically integrated commodity supply chain company, and we're actively pursuing top line growth to achieve the scale that we need to be to really hit those goals.

 When it comes to our non-core assets we certainly have a few, but they are so small, right? Compared to our $1.5 billion balance sheet that I just don't think it's worth our focus right now to try to dispose of them or to try to rationalize them. Really our goal is to integrate our new acquisitions and keep our nose to the grindstone and just keep pushing forward.

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 Jeff Pluntik,  - Analyst   [33]
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 And just my last question again on capital allocation. I mean you're not going back through years but the Company went public in the New York Stock Exchange and sort of announced this dividend program to prove its realness and what sayeth you on you know, dividends, capital allocation, stock appears under book value, share repurchase?

 I mean how are you thinking about this and who else besides the two of you is really a driving hand in these decisions?

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 Sam Morrow,  MFC Industrial - CFO   [34]
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 Capital allocation is a constant discussion in our day-to-day operations, comes up at every board meeting. Right now looking in all of the investment opportunities that we have across our subsidiaries, the potential returns far outweigh anything that we think we would see from a share buyback.

 Our goal is to grow book value on a per share basis and we firmly believe that's the best - sorry that the best way to do that is through reinvestment into our company. So we have no intentions of repurchasing any shares at this time and we believe that our dividend policy, which has been approved by the board is appropriate.

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 Jeff Pluntik,  - Analyst   [35]
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 And so who else on the board, I mean again the water cooler making these decisions and this and that, who else besides the two of you is crucial to this discussion?

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Unidentified Company Representative   [36]
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 I think the board in general is and our Managing Director Michael Smith and we look for advice from the entire board.

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 Jeff Pluntik,  - Analyst   [37]
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 And my last question, I'm sorry, I don't mean to hog. Just characterize Mr. Smith's current involvement with the Company.

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Unidentified Company Representative   [38]
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 He is still the director of the Company and he works now more in the field of special projects on the acquisition and merger side, which has always been his expertise.

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 Jeff Pluntik,  - Analyst   [39]
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 Got it. But would you say there is a material difference over this company through its history and today is Michael the chief shot caller so to say? The Board and the two of you, and then Michael sort of on the side in special projects, is that an accurate assessment?

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Unidentified Company Representative   [40]
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 I would say Michael is still involved because he is on the Board, so he will always give us advice on I think the global picture of the Company, but he has stepped aside and he is working more towards the special projects. I know we have a new leadership there and I think it's good for the Company, we're a bigger operating company than we were a year ago, and that's really the direction we need to go in.

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 Jeff Pluntik,  - Analyst   [41]
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 Gentlemen, I thank you for your time.

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Unidentified Company Representative   [42]
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 Thank you.

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Unidentified Company Representative   [43]
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 Thank you.

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Operator   [44]
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 Thank you. Your next question comes from the line of George Burmann. Please proceed.

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 George Burmann,  - Analyst   [45]
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 Good morning, gentlemen, thanks for taking my call.

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 Sam Morrow,  MFC Industrial - CFO   [46]
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 You're welcome.

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 Gerardo Cortina,  MFC Industrial - President, CEO   [47]
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 Good morning.

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 George Burmann,  - Analyst   [48]
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 And welcome to the two gentlemen here. And I guess this is your first call for MFC Industrial. Welcome.

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 Sam Morrow,  MFC Industrial - CFO   [49]
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 Thank you.

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 George Burmann,  - Analyst   [50]
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 Quick question in your opening remarks you mentioned that you're looking to increase -- your SG&A and top line growth, most companies from my expertise try to cut SG&A to increase profitability and I'm looking at your just briefly at your income statement here on almost a 60% -- 70% rise in sales, your income for operations actually dropped by $500,000 from $21.2 million to $20.7 million. Maybe you misspoke there but in my book, yes you want to increase top line growth but you want to make sure that something is left on the bottom line.

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 Sam Morrow,  MFC Industrial - CFO   [51]
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 No, of course George. But what we meant by that, SG&A is a significant driver of revenue in a supply chain commodity company. And this is a top line business, so at some point we will be able to truly leverage SG&A but right now we're actively growing, in worldwide, we're opening up new offices where we can, we're hiring where we can and some of that hasn't necessarily shown up in revenue or profitability yet. So we want to invest in SG&A, we think it's quite important.

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 George Burmann,  - Analyst   [52]
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 So when you're saying global supply chain management company let's say is run by its people, and you basically are saying that in the past you may have not had staffing, you've had staffing issues but you didn't have enough people with feet on the ground to participate in and work with the global supply chain.

 Now with the recent acquisitions, you've achieved scale where you can operate worldwide, and now you need to put the feet on the ground and sales people in place to generate the top line since the business in general is not high margin but low margin and lots and lots of turnover. And then it comes to the bottom line. Is that about it?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [53]
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 Yes we're investing in people and as we also said in our remarks we're working on increasing our profitability and that takes time. I mean we just made these two acquisitions in March and April, we're integration them, the process is going well and we will see the results in the coming months.

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 George Burmann,  - Analyst   [54]
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 Okay. The acquisition you made a year ago of the oil and gas operation in Canada, it's one thing to be a global supply chain management company. It looks like you are also moving into partially maybe with the [Cliffs] negotiations into owing some of the supplies too, or would you consider say the very worthwhile acquisition of this Canadian operation to maybe just sell it because you don't want to own any physical assets, just trade --

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 Gerardo Cortina,  MFC Industrial - President, CEO   [55]
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 That's not true. You know, the captive sources I think are very important of being in this business. It keeps us having controlled supply, we can judge our prices better and if you look at some of the other big companies that are in the same business like a Glencore, They all captive sources and I think the captive sources are always going to be an important part.

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 Sam Morrow,  MFC Industrial - CFO   [56]
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 George, so FESIL has production facility for ferrosilicon in Norway and that's very strategic to that business. In addition, not just focused on our own captive sources but we're interested in entering into offtakes and other agreements that might be able to get us captive supply as well.

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 George Burmann,  - Analyst   [57]
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 And then you try to sell this all over the world? Where there is demand and higher price you go and sell it to your captive supply that you have somewhere else?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [58]
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 Correct. As we said I mean we have worldwide coverage, we have offices in the US, in Mexico, in Central America, in South America. We're well-established in Europe and in Asia. So yes we have worldwide coverage and that we look at opportunities and we sell where we can get the best returns.

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 George Burmann,  - Analyst   [59]
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 And your employees have the personal relationships with the -- basically with the end users that make the commerce possible?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [60]
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 Correct. We have been -- our companies in the States, Mexico, Argentina, they have been around for almost 30 years. FESIL has been in Europe well established for a long period. So yes we have very good established relations with our customers, mainly steel mills and foundries.

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 George Burmann,  - Analyst   [61]
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 Okay. For -- just for kicks, can you go into your thinking on the acquisition, the Company you bought in Norway that has also mining operations I guess in Spain. Is it FESIL?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [62]
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 Yes. I mean in Spain it's a very small quartz of mine -- that it's a raw material that is used in the production. As we already said, FESIL has production facility in Norway producing high grade ferrosilicon and then has offices in Germany, in Luxembourg, in Spain, in the US and in China doing all the marketing and not only of the ferrosilicon but a wide range of products servicing the steel and foundry industries.

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 George Burmann,  - Analyst   [63]
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 Yes and it used to be a subsidiary of a larger company, and you only bought this particular subsidiary right?

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 Sam Morrow,  MFC Industrial - CFO   [64]
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 No, FESIL was and is still quite a large company. The only asset that we did not purchase is the former shareholder of FESIL retained the interest in the [MO] industry park which is the industry park where the production plant is located.

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 George Burmann,  - Analyst   [65]
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 Okay, so [excellent] real estate?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [66]
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 Yes, exactly.

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 George Burmann,  - Analyst   [67]
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 Okay and looking at that now, the amount of money you paid for it, obviously your cash went down by about $150 million year-over-year what do you see this thing growing into? What aspect is it that makes it so valuable for the family of MFC's supply chain companies?

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 Gerardo Cortina,  MFC Industrial - President, CEO   [68]
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 Well ferrosilicon is a strategic, very important product in steel production and not only that, I mean FESIL has supply agreements worldwide on many different commodities. So FESIL brings to the group all that sourcing, all the experience that will help us worldwide improve our sales to the steel and foundry industries.

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 Sam Morrow,  MFC Industrial - CFO   [69]
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 And George also the people at FESIL are phenomenal. We have got incredible human resources there and when we talk about investing in SG&A the best way is through people that are already working collaboratively as a team. So this acquisition was very strategic from an assets standpoint but also a very strategic from a human resources standpoint.

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 George Burmann,  - Analyst   [70]
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 Thanks very much, it sounds all pretty promising, and we'll be along for the ride.

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Operator   [71]
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 Your next question is a follow-up from the line of Sven Carlin. Please proceed.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [72]
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 Sam, looking back at some of the activities over the last six or seven years which you're still kind of hanging out there in my mind. Have you guys -- are you guys completely out of the real estate business in Cologne at this point?

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 Sam Morrow,  MFC Industrial - CFO   [73]
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 It's in Germany, it's not Cologne actually. Cologne was, KHD was -- we still hold some real estate in Germany.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [74]
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 That's still there but it's relatively minor at this point?

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 Sam Morrow,  MFC Industrial - CFO   [75]
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 It is.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [76]
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 Okay and how about the Uganda power plant? Have we started with revenues there and EBITDA, where do we stand on that?

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 Sam Morrow,  MFC Industrial - CFO   [77]
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 Revenues are -- we are still operating the power plant and it's doing quite well.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [78]
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 Okay can you quantify that in any way?

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 Sam Morrow,  MFC Industrial - CFO   [79]
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 For the six months revenue generated from that, from our Uganda power plant was $1.7 million.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [80]
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 Okay, that gives me a pretty good picture. And then the third thing is when you got out of Goa in India and the iron ore business there, my recollection is that you had a some sort of retained ownership where you had a potential for clawback and I know that iron ore production has started again in India. Is that -- are you getting a call back and is that a significant number?

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 Sam Morrow,  MFC Industrial - CFO   [81]
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 No we're not. We're not getting anything right now. They have only -- we established some of the mines but very few.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [82]
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 And then last question is, who is calling the shot on the gas price arbitrage? I mean obviously you had a big move, big spike in gas prices last winter, I know sold forward a lot of gas and I see recently it looks like you've covered some of that short. Do you've a trading department? Who is calling the shot on that gas price arbitrage?

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 Sam Morrow,  MFC Industrial - CFO   [83]
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 Sure. The Board of Directors has approved a hedging policy companywide and we have a hedge committee in place which consists of a person in Vienna, Gerardo and myself which takes recommendations and implements and approves all of the natural gas hedges.

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 Sven Carlin,  Wells Fargo Securities - Analyst   [84]
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 That's very helpful. This has been a very helpful conference call, a great start, Sam and Gerardo, I think, we're going in the right direction here.

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 Sam Morrow,  MFC Industrial - CFO   [85]
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 We appreciate that and please keep in touch, like I said, we're open to your comments, we really hope to have more questions, the harder the better.

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Operator   [86]
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 (Operator Instructions).

 Your next question comes from the line of [Bernie Harris]. Please proceed.

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 Bernie Harris,  - Analyst   [87]
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 Good morning. Thank you for this call, as the last person commented, it's been much helpful than in the past. I have two questions, one is to do with the project up in Canada. According to your press release it could come online in the first quarter of '15. That whole project up there -- when do we really can we start expecting some decent revenue from there?

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 Sam Morrow,  MFC Industrial - CFO   [88]
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 Sure. So, in the 6K there is actually a great picture that Rene took of the construction of the power plant which is at our processing facility south of Calgary. So the final commissioning will occur in Q1 of 2015. We're currently on schedule for that and we wouldn't anticipate revenue in the first half of 2015.

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 Bernie Harris,  - Analyst   [89]
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 And my second question is not to do with so much with a question but in the past we have discussed it, none of the directors, I don't know if this has changed with this change over but none of the directors really owned any stock which I think is very important for the general public to see that you've interest in it. Is this going to change or is there going to be any type of mandatory - because it's been talked about it in the past.

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 Sam Morrow,  MFC Industrial - CFO   [90]
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 It's already changing; you can see one of our director's is the largest shareholder in the Company.

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 Bernie Harris,  - Analyst   [91]
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 Yes, but he's always been. There were many Directors that were not, didn't own any shares at all.

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 Sam Morrow,  MFC Industrial - CFO   [92]
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 Some of them now what we're doing is setting up a stock option program and you can see from Mr. Cortina's filings, he now has a good chunk of the stock. So I think we're going to move in that direction to get more of these directors at least stock options if not direct stock.

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Operator   [93]
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 There are no additional questions at this time. I would now like to turn the presentation back over to Mr. Gerardo Cortina for closing comments.

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 Gerardo Cortina,  MFC Industrial - President, CEO   [94]
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 So thank you very much for your participation in this call. As Sam said, we're open for all your comments. We are a new management team in place, we're very optimistic about the future we have won through these acquisitions and we will be working hard over the next few months to show all these results turn into revenue and improvement of our profitability. Thank you.

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Operator   [95]
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 Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.




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