When your current assets aren’t current
December 15, 2022 Leave a comment
I am defining the coming decade in investment markets as an ‘accountant’s decade’.
It’ll be about the real numbers rather than wondrous customer growth prospects in the absence of profit.
S.E.B. (the Paris listed owner of household and professional kitchen brands such as Krups, Lagostina, Moulinex, Rowenta, and Tefal) currently holds $1.85 billion held in inventories.
This equals nearly half of the company’s market capitalisation
or 25% of its annual revenues.It has a further $1 billion on the books as receivables.Gosh, I hope their customers start paying them soon and hopefully 100% of what is owed.
See where I am heading with this?
A month I started to highlight a similar situation at Danish wind turbine manufacturer who carries
inventory equal to 35% of it market capitalisation or 45% of its annual revenue.
Although all of these stock prices have been slaughtered in the proceeding months and companies in this predicament will still need to work off their inventories and/or recover most of the receivables owed.
As highlighted in other past posts about inventories build up and price discounting, it’s a reminder to do your work, slash some assumptions and make adjustments.
December 15, 2022
by Rob Zdravevski
rob@karriasset.com.au
rob zdravevski's blog 