Why is Mt Romance attempting to purchase Australian Sandalwood oil when its parent (TFC) is a grower of Indian Sandalwood?
(Note, Australian sandalwood’s aromatic properties are inferior to Indian Sandalwood but is substantially lower cost).
Possibilities could be:
Mt Romance can make a greater margin selling its products using the lower cost sandalwood oil.
TFC’s Indian Sandalwood is at Kununurra whereas Mt Romance produces its perfumes and other products at Albany. So the transport is a factor (I doubt this is a factor)
TFC can sell all of its Indian Sandalwood at the substantially higher value to Indian and Chinese customers; French perfumery customers and the pharmaceutical industry. Therefore, it is better to purchase the inferior and lower cost Australian Sandalwood for its Mt Romance operations. (I hope this is the reason).
I would appreciate other people’s views,
TFC Price at posting:
$1.57 Sentiment: Buy Disclosure: Held
