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Corporate Overview
In this third year since becoming an independent company, we have kept focus on redefining our corporate objective of fully capitalizing on our industry knowledge and striving for greater growth and diversification.
Our commodities business along with our large number of related contacts has enabled us to gain greater product and service diversification and to find new markets. Almost 60 percent of our trading revenues are from term marketing and distribution agreements for non-ferrous and other metals. This business should not be viewed as commodities trading but as a risk business between suppliers and purchasers. Some of the investments we make are in commodity producers and are part of our proprietary investing strategy. We have now shipped our first shipment from our iron ore mine reserve in India and anticipate additional shipments after the rain season at the end of this year.
At this point, we see the basis for a strong year developing Net income amounted to $25.6 million for the same period. Return on equity was 25 percent. In comparison, the S&P 500 returned negative 15 percent in this period. Equity per share increased to $6.97, a 163 percent increase in two years. At June 30, the company had 287.8 million in cash and securities and our working capital ratio was 2.49.
With the downturn in the global economy, opportunities are becoming more visible. Valuations of several, what look to be, complementary projects have been coming closer to much more sensible levels. We will, however, maintain our strict level of discipline in assessing risk.
As this is a document of our performance this past six months it should be admitted that we are not pleased with it as a public record. Progress on certain key projects proved fruitless. We are capable of more. What can go wrong often does and suffice to say several hurdles sprang up on our path and slackened our pace during this period. MFC’s performance, however, is better measured over a longer period than six months or one year.
It is now time to start creating market awareness and liquidity for our shareholders. One of the very first steps is to complete the process of listing our common shares on the Vienna Stock Exchange. This will only be an initial step in creating liquidity for our common shares since we were spun out in 2006 and marks an important phase in enhancing shareholder value.
Ensuring the effectiveness of our strategy demands constant review and attention in order for it to reflect our commitment to developing wealth for our shareholders.
Financial Highlights
(U.S. Dollars in Thousands, Except per Share Data and Ratios)
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2008(1) |
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2007(4) |
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2006(4) |
Cash |
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262,910 |
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183,903 |
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99,078 |
Securities |
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24,856 |
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45,984 |
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36,787 |
Current Assets |
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403,372 |
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315,256 |
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195,462 |
Total Assets |
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457,162 |
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355,576 |
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230,437 |
Current Liabilities |
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162,227 |
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143,324 |
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91,280 |
Working Capital |
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241,145 |
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171,932 |
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104,182 |
Current Ratio |
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2.49 |
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2.20 |
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2.14 |
Long-Term Debt, less current portion |
60,902 |
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28,068 |
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4,710 |
Long-Term Debt-to-Equity |
0.51 |
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0.34 |
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0.10 |
Debt - Preferred Shares (2) |
89,207 |
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91,956 |
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77,976 |
Total Liabilities |
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323,413 |
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272,859 |
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183,491 |
Shareholders' Equity |
118,811 |
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81,583 |
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45,131 |
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Return on Equity |
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25% (3) |
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77% |
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40% |
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Equity Per Common Share |
6.97 |
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4.79 |
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2.65 |
Notes:
Unaudited figures for the Six months ended June 30, 2008.
On our opening balance sheet of 2005, preferred shares are denominated in Canadian dollars.
Not annualized.
As of December 31.
* CLICK HERE TO ENLARGE TABLE
Growth Prospects
With the global slowdown this year, growth is not anticipated in our markets. But opportunities could arise given our strategy and structure. The more problems which develop in the market the more opportunities appear available to us. As part of our internal growth strategy,
we intend to pursue an active program of seeking out projects that will complement our operations. We will continue to evaluate our operations and we may propose exiting additional businesses, markets or service platforms in order to better align our operations with our strategic objectives.
Liquidity
We continue to achieve adequate liquidity and financial ratios. At June 30 working capital was $241.1 million; we had total assets of $457.2 million, and our long-term debt-to-equity ratio was 0.51. We also had lines of credit in the amount of $478.5 million. As part of our merchant banking activities, we establish, utilize and maintain various kinds of credit lines and facilities with other banks, insurers and finance providers. These facilities are primarily used for structured trade financing, accounts receivable financing and letters of credit. We often enhance the credit of such facilities through credit and/or performance insurance. Such trade finance insurance is often layered with varying limitations and exceptions.
We believe that cash flow from operating activities, together with cash on hand and borrowings available under credit facilities will be sufficient to fund currently anticipated working capital, planned capital spending, and debt service requirements for some time.
Historically, we have funded out operations with cash generated
and our current cash level is healthy.
Description of our Merchant Banking Business
Our merchant banking operations include the provision of innovative financial structuring and advisory services. We focus on meeting the financial needs of small to mid-sized companies and other business enterprises primarily in Europe, North America and Asia. We believe that many of these clients, particularly in Europe, are under-serviced by the large investment banks and financial service providers. We specialize in advising businesses involved in uniquely difficult situations in which a strong financial partner is needed and traditional, "off-the-shelf" solutions are not workable.
MFC also counsels our clients on corporate and financing strategy, and assists them in the raising of capital for strategic goals, including mergers, acquisitions and reorganizations. In addition, we generate fee income by acting as an arranger and/or provider of bridge or interim financing to companies pending reorganization, prior to their going public, as a complement to our commodities and natural resources trading. In furtherance of such banking and advisory services, we often advise and help restructure enterprises that are undergoing financial distress or have, or are near, debt defaults.
We believe that our experience and operating structure permit us to respond more rapidly to our clients' needs than many of our larger competitors. These traits are important to small and mid-sized business enterprises, many of which do not have large internal corporate finance departments to handle their capital requirements. We develop a partnership approach to assist clients. This often permits us to develop multiple revenue sources from the same client. For example, in addition to providing banking and advisory services, MFC may purchase and sell a client's products or invest its own capital in their business.
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