CD International's Management Discusses F3Q2012 Results - Earnings Call Transcript

| About: CD International (CDII)

CD International Enterprises, Inc. (NASDAQ:CDII)

F3Q2012 Results Earnings Call

August 14, 2012 4:30 PM ET


Hernan Welch - Chief Financial Officer

Richard Galterio - Vice President


Ken Mann - American Consulting Services

Marco Barattini - Barattini Investment Advisors


Greetings, ladies and gentlemen. And welcome to the Fiscal 2012 Third Quarter Earnings Conference Call for CD International Enterprises Inc. For those of you who may be new to the company, CD International Enterprises trade on the OTCQB Marketplace under the symbol CDII.

CD International Enterprises is a U.S. based company that produces, sources, and distributes industrial commodities in China and the Americas, and provides business and financial corporate consulting services. For more information on this company, please visit its website at

Our call today is hosted by Mr. Hernan Welch, CFO; and Richard Galterio, Vice President. Additionally, a Q&A session will follow management’s discussion of the third quarter ended June 30, 2012.

At this time, I would like to refer to the Safe Harbor statements under the Private Securities Litigation Reform Act of 1995. During the conference call management may discuss financial projections, information or expectations about the company’s products or markets, or otherwise make statements about the future, which statements are forward-looking and subject to a number of risks and uncertainties, that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company’s filings with the Securities and Exchange Commission, including its most recent Form 10-K.

At this time, I would like to introduce Mr. Richard Galterio, Vice President of CD International Enterprises. Thank you, sir. You may begin.

Richard Galterio

Thank you, Operator. And all of you who are joining us for our third quarter of fiscal 2012 conference call. CD International recorded revenues of $37.3 million for the quarter third quarter of fiscal 2012 with gross profit of $1.1 million and a net loss attributable to common stockholders of $1.4 million. This compares to revenue of $57 million, with gross profit of $7.6 million and a net income attributable to common stockholders of $4.3 million recorded in the same period in fiscal 2011.

Gross margins in the third quarter of fiscal 2012 was 3%, down from 13.3% in the same period from the prior year, largely due to the timing of a high margin large transaction which took place in our Consulting segment in the third quarter of fiscal 2011, and contributed approximately 10 percentage points in gross margin in that quarter.

Net loss per basic and diluted share outstanding was $0.03 in the third quarter of fiscal 2012 on $48 million basic and diluted weighted average shares. Earnings per basic and diluted shares outstanding was $0.11 in the prior quarter on 38 million weighted average shares.

For the first nine months of fiscal 2012, we recorded revenue of $116.1 million with gross profit of $13.3 million and net income attributable to common stockholders of $3.7 million, resulting a $0.09 per basic share on 43 million weighted average shares and $0.08 per diluted share on 47 million weighted average shares outstanding.

This compares to revenues of $145.1 million with gross profit of $17.3 million and net income attributable to common stockholders of $7.7 million resulting in $0.22 per basic and diluted share on 35 million weighted average shares outstanding.

Gross margins and net margins for this first nine months of fiscal 2012 were $11.4 million and 3, excuse me, 11.4% and 3.2%, respectively, compared to 11.9% and 5.4%, respectively, in the same period in fiscal 2011.

In highlighting our Magnesium segment, we saw slightly improve conditions in pricing as compared to the comparable quarter in fiscal 2011. Total revenue for the quarter was approximately $26.5 million, as compared to $25 million recorded in the third quarter of fiscal 2011.

Gross margin improved to 3.1% in the third quarter, up from 2.5% in the third quarter of fiscal 2011 and up sequentially from 2.6% in the prior quarter. We believe gross will continue to improve as we integrate our acquisition and increase volumes, during the current period we continue build inventory in anticipation of rising prices and increasing demand.

With the recent increase in spot prices rising in the past two months to 3400 FOB China, we believe we will be rewarded in the future for our inventory, as well as our prepaid expenses and we anticipate a firming in demand as we move through the remainder of the calendar year.

Our Basic Materials segments saw a sharp decline in revenue which totaled $10.6 million, declining by $9.5 million compared to same period in fiscal 2011. The decline in revenues was mainly a result of declining sales at our CDI Beijing subsidiary compared to the same period in fiscal 2011. And this is due to reduced demand from urban infrastructure expansion caused by tightening of credit in China.

In our Consulting segment this quarter, we generated a small amount of recurring revenue. However, we have seen a number of positive developments in this segment which I will highlight later in this call.

While our efforts in our commodity distribution business in the Americas has experienced a number of challenges, our team is on the ground there and we are working diligently to begin to deliver on the rich potential of this business. We will continue to deploy our resources in the Americas to build inventory in our Magnesium segment in anticipation of increases in demand.

Our balance sheet remained strong with cash equivalence of $4.1 million and $21.2 million in prepaid expenses, as compared to cash and cash equivalents to $12.6 with $14.4 million in prepaid expenses at September 30, 2011.

We are continuing to execute on our strategy of being a global leader in the magnesium industry and to globally diversify our revenues through our commodity business and consulting operations.

I would now like to turn the call over to Hernan, our Chief Financial Officer to discuss the second quarter, excuse me, to discuss the third quarter in more detail. Hernan?

Hernan Welch

Thank you, Rich. For the first nine months, we recorded consolidated revenues of approximately $116.1 million, compared to $145.1 million recorded in the same period in fiscal 2011.

Gross profit for the first nine months reached $13.3 million, compared to $17.3 million recorded in the same period in fiscal 2011. We recorded net income attributable to common share -- stockholders of $3.7 million for the first nine months of fiscal 2012, compared to a net income of $7.7 million recorded in the same period for fiscal 2011.

For the first nine months our basic income per share was $0.09 a share on 43 million basic weighted average shares outstanding and $0.08 on 47 million diluted weighted average shares, compared to basic and diluted income per share of $0.22 on 35 million basic and diluted weighted average shares recorded on the comparable period in fiscal 2011.

For the third quarter of fiscal 2012, we recorded consolidated revenues of approximately $37.3 million, compared to $57 million recorded in the third quarter of fiscal 2011.

Gross profit for the period was $1.1 million, compared to $7.6 million recorded in the same period in fiscal 2011. After including other income and operating expenses we recorded a net loss attributable to common shareholders of $1.4 million, compared to a net income of $4.3 million recorded in the same period for fiscal 2011.

Our net loss applicable to stockholders in the third quarter of fiscal 2012 resulted in basic and diluted loss per share of $0.03 on 48 million basic and diluted weighted average shares outstanding, compared to basic and diluted income per of $0.11 on 38 million basic and diluted weighted average shares outstanding recorded in the comparable in period in fiscal 2011.

We saw some encouraging signs from our Magnesium segment where revenues increased in the third quarter of fiscal 2012 to $26.5 million, as compared to $25 million recorded in the same period in fiscal 2011.

We shipped 8,894 metric tons of magnesium related products in the third quarter of fiscal 2012 with an average sales price of $2,793 per metric ton, compared to 9,049 metric tons shipped at an average sales price of $2,765 per metric ton in the third quarter of fiscal 2011.

Our revenues and sales volume remained steady despite the softness in demand in China’s domestic market, as well as the global market, due to lingering uncertainties surrounding the European debt situation.

However, the overall economic conditions are improving and we are seeing a sharp increase in Magnesium spot price subsequent to the quarter’s end, which we anticipate will lead to increased volume for the remainder of this year and into fiscal 2013.

For the third quarter of fiscal 2012, gross profit for this segment was approximately $835,000, compared to gross profit of $627,000 recorded in the same period in fiscal 2011.

Our magnesium operations resulted in an operating loss of $700,000, inclusive of $600,000 on depreciation expense, compared to operating loss of $100,000 inclusive of $900,000 depreciation expenses recorded in the same period in fiscal 2011. Overall, our profits were positively impacted by change in our depreciation method, the units of production applied to our Magnesium segment.

Our Basic Materials segment revenue totaled approximately $10.6 million in the third quarter of fiscal 2012, compared to $20.2 million recorded in the same period in fiscal 2011. Our Basic Materials segment generated a gross profit of $0.5 million in the third quarter of fiscal 2012, compared to $1.2 million recorded in the same period in fiscal 2011.

Operating loss for the third quarter in fiscal 2012 was less than $2 million -- $0.2 million compared to operating income of $0.2 million recorded in the same period of fiscal 2011.

Business activities contracted sharply of CDI Beijing, due to the China slowdown in urban real estate development in major metropolitan regions, as well as the tightened credit policies that severely affected the sale of our construction steel related products. We also recorded some modest expenses in association with our operations in the Americas.

Revenues from our Consulting segment was $0.1 million in the third quarter of fiscal 2012, compared to $11.8 million recorded in the same period in fiscal 2011. Gross profit of this segment was at a loss of $0.2 million, compared to $5.7 million recorded in the same period in fiscal 2011.

We recognized all of our management corporate overhead in this segment and recorded operating loss of $1.6 million in the third quarter of fiscal 2012, as compared to an operating income of $4.5 million in the same prior period fiscal year.

Revenue in our Consulting segment varies depending upon the level of service, contractual events and the addition of new clients. We did not have any significant transactions in the third quarter as opposed to the same quarter in prior year where we recorded transaction related revenue for a new client. We currently have seven clients that we service on a continuos basis.

From an overall balance sheet perspective, we remain well-positioned for the future. As previously mentioned, we ended the third quarter of fiscal 2012 with $4.1 million in cash and cash equivalents, with prepaid expense of approximately $21.2 million, compared to cash and cash equivalents of $12.6 million, with $14.4 million in prepaid expenses at September 30, 2011.

Total assets reached $150 million, compared to $116.3 million and shareholders equity reached to $78.5 million, compared to $68.3 million at September 30, 2011. By June 30, 2012, we have $30.6 million in working capital, compared to $44.8 million at September 30, 2011.

In summary, though we faced certain business challenges in the quarter, mainly within our Basic Materials segment. We are well-positioned to capitalize on improving trends in our Magnesium segment. We have taken several steps to substantially reduce overhead at the corporate level in the quarter, so that the improvements in our business will flow through to our bottom line at a faster pace.

We continue to devote substantial efforts in improving our internal control system, including the continuing deployment of our ERP financial accounting software system over the remainder of 2012. And continued to rationalize and streamline our Magnesium operations to reduce costs and increased operational efficiencies.

We also intend to rationalize and streamline our Basic Materials segment in order to maximize our return on capital internationally. We will continue to look to reduce costs, with our efforts around maintaining inventory levels we believe are appropriate to our business needs. Our overall balance sheet remains strong. We believe we are well-positioned for the future.

At this time, I'll turn the call back over to Richard for some closing comments.

Richard Galterio

Thank you, Hernan. Our results for the third quarter of fiscal 2012 reflects some improving trends in our Magnesium segment, coupled with pronounced weakness in our Basic Materials business in China, mainly from our construction materials subsidiary.

While our Consulting business contributed to revenue in a small way in this quarter, there have been a number of positive developments in this segment. First, a number of our consulting clients operating in China have performed well in recent quarters, leading to sharp increases in the value of debt maturity.

We have also resigned one recurring services contract that expired in the quarter, which will further bolster revenue in this segment moving forward. With the completion of our recent magnesium acquisition, we are now one of the leading worldwide producers by way of production capacity and we are beginning to see some improvements in topline margins as we integrate our operations.

Our balance sheet and current assets remained strong and we are continuing to reduce operating expenses. We are continuing to develop and work with industry experts on our IMG pricing strategy to create more long-term stability and order flow, and pricing to enable us to secure larger and longer-term customers in our Magnesium segment.

As we look into the future, we believe we are entering a much more positive environment for Magnesium. Recently, spot prices -- spot magnesium prices have driven by more than 11% in the last two months alone, suggesting that demand trend should be favorable in the coming quarters.

Should these increases hold or increased further, our decisions to build capacity and inventories should be rewarded in the form of much improved performance in the coming quarters and into fiscal -- 2013.

As we move through this year and into fiscal 2013, we will now look to capitalize on our magnesium operations we have built and acquired. We have the capacity to grow substantially without the need for additional acquisitions or facility expansion and we have made substantial investments in inventory and prepayment of expenses to fuel that growth to lead what we believe will be stronger demand in the coming quarter and into 2013.

We are also exploring strategic alternatives for our other China businesses in order to recapture and reallocate our capital in China towards Magnesium solely. We see additional opportunities in our Consulting segment as our efforts to expand and diversify our client base, has the potential to yield substantial rewards to us through their strong performance.

We also -- while our efforts in our commodities distribution business has experienced a number of challenges throughout the year, we are still positioned to again deliver on a rich potential of this business.

We believe that by focusing our efforts in China on magnesium and positioning our basic materials operations in the Americas, we can achieve much stronger and more geographically balance growth.

In closing, I would like to emphasize we are confident our balance sheet with over $30 million in working capital and over $78 million in shareholder equity gives us a solid foundation for a growing future. We have performed at a profitable level for the first nine months of fiscal 2012 and have built a substantial engine in China for magnesium production.

We are confident that this will enable us to rapidly improve performance in the coming quarters, along with our consulting and commodities operations. We are working diligently to position CD International as a driving globally diversified company with substantial opportunity for growth.

Allow me again to thank you all for joining us and now operator, you can please begin the Q&A.

Question-and-Answer Session


Thank you. (Operator Instructions) Our first question comes from the line of [Ken Mann] with American Consulting Services. Please proceed with your question.

Ken Mann - American Consulting Services

Good afternoon, Hernan and Richard. I’m not impressed with the quarter, but I understand the problems that you guys have had to work through with the world economic situation. But here’s what I got, okay.

The China -- the Chinese government has a 10% export tax on magnesium. I’ve heard from sources that I have, that the government may eliminate the tax. Are you either lobbing the government or do you have an opinion on that, that it may end, which would increase our profit in magnesium by 10%?

Richard Galterio

Ken, that’s a great question. There is a great feel of talking there has been something to written that the government is looking to end that specific export tax on magnesium. There has been talks that will happen sometime before the end of this year.

If that does happen, we believe that will be a very particular benefit to us and the reason being is because we are a producer, we really have limited ways to maneuver around the tax like that.

There are other companies that operate as solely as distributor that operate in ways that, they talk they has been able to avoid that taxation through some loopholes and things like that. We believe that if that tax does move away, it will certainly help a company like ours, perhaps not the full 10%, but certainly it would mean a great deal to us in terms of our margins. Prior to that tax being out there, our margins were significantly higher in the past. So if they did return to those levels, it certainly would be a huge boost in that arena for us.

And with magnesium prices really starting to solidify it’s been - basically a year and half of two years of relatively slow growing prices on the low end of the equation and especially when you compare it to some other metals in the industry, we're kind of – we’ve been planning and building for 2013 and if those wins turn favorable along with its tax things could change dramatically for us in that segment and that’s we have been building towards.

Ken Mann - American Consulting Services

Okay. Great. I understand that magnesium will be a big thing in the future. But next question to you, I read an article recently only several days ago that the - in the Chinese Daily which is here New York Times, that the government intend to close down all small magnesium mines and produces, which would amount to approximately reduction of 20% of the magnesium production supply. Can you comment on that? Have you heard that or do you have any idea what I am talking about?

Richard Galterio

Yeah. There has been talk about that for a relatively decent period of time. There has been time when the government has looked to shutdown based upon solution. There has been times when the government has shutdown for other reasons as well. I would say that if they did shutdown producers who win aggregate could not produce a great deal, I think that would certainly be the beneficial for the producers who can’t produce the lot more.

But I would also kind of caution that a little bit with the fact that if you take too much supply out of the market and prices move too swiftly as what happened when prices ramp from 3500 to 5500 back in 2007, 2008.

Then you can’t sustain that level because then you will have people switching over to aluminum and switching over to other things for certain parts di casting. It certainly will be governor on that. I mean it would be helpful but we don’t want to create one of the problem that magnesium has had as being variable supply and inconsistency in supply and still well I would like to see something on the small manufacturers I don’t know that we would like to see a hope -- 20% pricing in output that would in the sharp ways through the market.

Ken Mann - American Consulting Services

Richard, the article stated in black and white that the Chinese government intends to shutdown all mine magnesium producers and producers of magnesium themselves like us that produce 2000 tons a year or less because they pollute too much and that’s what it was about, it’s a real article…

Richard Galterio

I know that’s article and I have seen that article and I know that there is a number that they talked about is 20%. All I am saying you Ken is that well, yet that we’ve certainly benefit us in a cutoff in front end supply of smaller producers, I don’t know necessarily if its coupled with the tax being dropped and it doesn’t affect the market from a pricing standpoint too much, it will be great. But what you don’t want to how to do with also shutoff demand because prices get too high.

Ken Mann - American Consulting Services

Obviously. Another question everybody, okay, the Board of Directors has implemented a new stock option program. Now as a shareholder I am not opposed to a new stock option program I think its excellent for people that they get something from what they work hard for us. What I am opposed to is using the current share price as a lever to set an unrealistic strike price on those options.

I mean when you go back we were just $0.95 and now we are $0.30 or $0.25. And I just don’t think that the little shareholders that’s the guys I want to protect need to see something come in that’s unrealistic. I think if we do stock options, fine. I understand its part of your pay pack to most of your employees but it has to be in regional price for the shareholders also, you agree or disagree?

Richard Galterio

I agree with you. It’s a challenge in terms if raised to an options to put option in an area that incentivized the employee that also our realistic in terms of where the company is versus where we believe it should be. So what I can tell you if we have not issued any options under the plan and should we issue them I think we will take all other things we consideration as we move forward and that’s what I can say I mean we are sensitive. I mean obviously there are people in the company that are also looking at pretty large shareholder as but well and I think that they don’t think or everything into consideration when they look to use option incentivized employees.

Ken Mann - American Consulting Services

Great. Okay. Lets move right along because I got couple more and I don’t want to pick up the whole thing for everybody else. Now, you close to selling especially steel business because that is not part of anything that we really need because we want to focus on the trading business and the magnesium business and partially on consulting. So have you anything done there, is there anything happening or what?

Richard Galterio

I think Ken what I can’t say here is we have been looking to position ourselves in China almost purely in magnesium. Obviously we are still running the operations that we have both Beijing and Lang Chemical.

I think if the right opportunity comes along and if we kick out the right opportunity, I think that that our ultimate goal its to become pure plane China in magnesium. And I really can’t comment further on that but what I can’t say is if you look for its history if we commented about something that we are looking to do typically we do that and typically we do that in a relatively reasonable timeframe. So its history to judge what we do. I think they hopefully in the future days will be positioning ourselves in China as a pure magnesium play.

Ken Mann - American Consulting Services

Richard, what I am saying here is that this quarter to third quarter that was the dark night of the third quarter. So if you unload the business or shut the business down it would probably be better for the shareholders and continuing your business that you make no money in. So if you can’t find a buyer please shut the thing down and on the real business…

Richard Galterio

And I hear what you are saying and as I said to you before I think if you look at the fact that even in relatively bad sales out of the two company, we really did lose a great deal of money in those operations, when you take it down to a bottom line standpoint and for the year. I think they are net, net neutral.

I will think that while yet these -- both of these operations had some part quarters and one in extremely subpart quarter. I don’t necessarily think it makes good business sense for us to just shut it down. But I do think it make good business sense for us to explore what opportunities are available to us.

Keep in mind we -- the stakes that we own in these companies, we did not deploy tens of millions of in dollars in capital to get. So if we do look to maneuver around them, we certainly would not look to maneuver around them in a way that would just recoup nothing for us. So I don’t think that’s in a plans but I certainly think that we have an eye towards streamlining and focusing on magnesium and we’re going to implement that plan.

Ken Mann - American Consulting Services

Okay. Richard, all I can say just look at for the little guy and so I am doing. I am looking out for the little guys. Well, you guys can do that. Next question the iron ore business okay, I understand we may have like 40,000, 60,000 tons in Chile ready to go as soon as we get through the Sunskar dispute. As far as your goals on iron ore in this trading business, I know this is something you want to really ramp-up. What is the managements goals on a monthly basis for iron ore and what is the potential tonnage profit in iron ore. Is it $20, it is $40 and after all expense is your potential there is a number there or what?

Richard Galterio

Ken I hope you can appreciate it. But given the Sunskar situation, this is a pretty sensitive topic for us…

Hernan Welch

In terms of both of what our goals are moving forward and some of the delays we’ve had as a result of the few issues of which that one of them. Until that situation is resolved and obviously that situation should be resolved quite shortly…

Ken Mann - American Consulting Services

In the quarter on this 20th, I know that…

Hernan Welch

Still that situation is…

Ken Mann - American Consulting Services

How confident are you in the outcome on the Sunskar dispute?

Richard Galterio

Yeah. Pending that when that outcome takes place, I think will be in a position to sort of communicate where we see the direction of this business going and certainly the outcome of that depending upon whether it moves along the way we would like to or if it doesn’t we are very hopeful its going to move in a right direction. I can’t answer those questions because I’d like to see that play out and I certainly think we will communicate what we see moving forward after that comes out depending upon the outcome.

Ken Mann - American Consulting Services

Okay. Richard I get it. I understand it. One way or the other Sunskar is going away whether we pay them 100,000 or we pay them nothing or we pay them 400,000 its going to gone. It’s going to be over, something finished. And then we are going to be in the iron ore trading business that’s what I want to understand what are the goals of the company on a monthly or quarterly basis of shipping iron ore?

Richard Galterio

What I would suggest to you Ken is if you can look back on some of the previous quarters and some of the things that we hope that we would be able to accomplish and we believe that it is possible accomplish in those areas, I don’t think anything has changed.

Ken Mann - American Consulting Services

Not to cut you off. I can memorize all those numbers. It was $100,000 and it was $200,000. Can you corroborate that?

Richard Galterio

Those numbers were certainly something that we published out there. And I can put it this way. In Chile alone, out of the one port that we’re looking to, if you work out, they’re looking to ramp up their iron ore output to, well in excess of 800,000 to 1 million upon the year.

If we were able to gain a foothold, if we were able to gain, to make the right move in that area, there is a vast opportunity there. And that vast opportunity, we’re fueling that related our capital from magnesium, should that work, if some of the [start the line for us] the huge engine in there and over time, that it has -- perhaps rival magnesium could do or perhaps do as well or even better and be a significant revenue screen as compared to China, it certainly does.

But as I said there is a bridge to cross over in order to get there, we have to put a number of things in place. We’ve been told by some of the – by some things including some star litigation and what that has done in the market place for obsolete as well as it slowed us down a little bit. It certainly has not been a helpful situation and it certainly has put a cloud in a number of areas in our business. And we’re hoping to get buyback move on.

We had some challenges again each quarter and we think we’re in a position to move capital challenges and we are working real hard.

I mean, is the potential for that business vast. Yeah it is. We have lot of things that doe subdued to unlock that potential, yes we do but it’s certainly there. And Ken I hate to cut you off but -- other couple of other questions and if you wanted to call me back offline, that would be great but we really been…

Ken Mann - American Consulting Services

Rich, I’ll add to that, to your comment. I believe in the iron ore distribution business in China because China consumes 40% of the iron ore every year, that’s a fact. That’s not maybe. That’s a real deal. And the only thing you need to do in that business is execute properly and that and you’ll be fine and I do have other question. So go ahead. Take somebody else. That’s fine.

Richard Galterio



Thank you. Our next question comes from the line of [Marco Barattini with Barattini Investment Advisors]. Please proceed with your questions.

Marco Barattini - Barattini Investment Advisors

Good afternoon. Just a couple of things, as far as the cash position exiting the quarter, previous quarter, you exited with a little over 12 if I remember right. And now you’re 4.1. What happened in the quarter?

Hernan Welch

Well, Marco, if we look at the last few quarters, our cash number has pretty much fluctuated pretty dramatically. I think when we headed out of the first quarter, we had about six. We went into the second quarter back up to 12. We went back down for this number.

I think when you look at our company because of what we do. To me, it would be - the better way to look at it, I guess, so to speak. To look at our cash, our prepaid expenses in our inventory and our receivables and kind of look at those number and you can kind of see where things move around a little bit because speaking if you see a dip in our cash usually corresponding upward movement in either our prepaid expenses or inventories or things of that nature.

And NY crossed about just the cash in the prepaid expenses. If you look at the cash equivalent and you look at the prepaid expenses, you’re looking at a pretty similar number from a standpoint of aggregating them. So when you’re taking a snapshot at any particular point in time, depending upon where everything is at any given point in time, our numbers vary around a lot. If you go back and look at our numbers, that’s been the case for a while now.

Marco Barattini - Barattini Investment Advisors

Okay. And the prepaid expenses, I assume that’s mainly future delivery of raw materials.

Richard Galterio

Hernan, why don’t you to take that?

Hernan Welch

Yeah. I’ll take it. Yeah, yeah Marco. If you look at one of our notes, most of our prepaid expenses or future supplies and deliverables that they will make, in other words, it’s for shipments that would have not been made yet. So there is a note there on the financials which we just filed that would illuminate you a little bit better on that.

Marco Barattini - Barattini Investment Advisors

Okay. I haven’t had a chance to go through the Q yet. I’ll surely do that after the call. Just one other question, right now with a spike in pricing in magnesium in July and thoroughly August, we’re about halfway through the fourth quarter. Do you have any kind of projections and how much tonnage have you seen shift so far in this quarter?

Richard Galterio

Well, we typically don’t comment on an interim basis about how much tonnage we put out. What I can say to you is you can put a few equations together. First of all in this market, the way that this market has been over the course of the top, probably three years, maybe even fourth in 2008, in every movement in price, it’s been messed with some level of disbelief. So when you have a quick strike in prices, most of the buyers themselves pay well probably isn’t going to last, it is going to come down.

So you have a little bit of hesitation when the move takes place initially. I would see that this move has seen to have been more rapid and taken ore in a way that might be different in some of the other moves that were made more towards the Chinese New Year and a lot of times that that inventory being taken before Chinese New Year because they know they’ll not be able to get it.

So this price crisis is taking place on at a relatively good time in terms of its cycle more on the producers that I have been then it is on the buyer side. So I’m encouraged by actually the timing of when this would be taking place as opposed, more opposed to anything else.

I think that from our standpoint the effect of this result are little bit in this quarter to effective price increases but certainly in more so affecting the first quarter as we’re starting to get orders now that deliverables come from a number of days or weeks or months from the order.

So with this price taking place and here it will have some effect in this quarter and if these prices hold or continue to move, it will have a much, much greater or more pronounced effect in the first quarter of our fiscal 2013.

Marco Barattini - Barattini Investment Advisors

Great. Thank you very much.


Thank you. Ladies and gentlemen, at this time, I would like to turn the conference back to Mr. Richard Galterio for closing comments.

Richard Galterio

Thank you again. I’d like to thank everybody for your support and we are working very diligently to move forward towards at the end of this year and into fiscal 2013. We believe we are well positioned in magnesium in terms of supply and we are confident that demand picture is looking better and hopefully we’ll continue to do so as we move into the coming quarters that help us deliver much more pronounced results.

And we look forward to speaking with you at our year-end conference call. If any one has any additionally questions, please feel free to call at our office and we will do the best we can to answer them. And once again, thank you and operator that concludes our call.

Hernan Welch

Thank you.


Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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