Earlier this year, I asked Harley Whitcombe if they were intending to eventually exit their carbon operations, and this was his answer:
It is not our intention to completely move away from the environmental services side of our business, but we need to make sure we are profitable and cash flow positive in our operations.
....We cannot see in the near future tree planting opportunities with the current federal government’s direct action concept, however we do see potential in time.
The carbon forestry and environmental services areas of the business are potentially quite profitable, but the problem is the regulatory uncertainty in this area. I suspect this is why the company hasn't paid out a dividend in the past decade, as the profitability of this type of environmental services company is too dependent on the whims of politicians.
The overall impression I get, is that the move into aquaculture is an attempt to diversify their risk, and to put the company on a surer footing.
Of course, aquaculture is not without risk: Cleanseas nearly got wiped out by disease a few years ago.
However, while aquaculture and environmental services are both risky areas, the risks associated with each are quite different: one is regulatory, the other is of a biological nature.
For this reason, I think the two sides of the business go well together: although you may get problems with one side of the business from time to time, the other side of the business will likely still be chugging along, leaving the company in a good position to recover from any setback.
COZ Price at posting:
7.4¢ Sentiment: None Disclosure: Held
