price up over 4% today, page-8

What does everyone make of the PPY Annual Report?

It seems that the sloooooowwww pace of production on the Beta machine continues. They have churned out just an extra 1000 sq of veneer in the last 3 months albeit running the factory part time. Remember the original order was a year ago for 10,000 sq metres- so still 7000 to go. Hardly stellar line speeds.

I notice at the bottom of page 11 the Egyptian transaction requires payment of the $2 million for the new plant and equipment - expected to be delivered to Egypt by 31 December 2011 - YET on page 10 it is noted that the new veneering units ‘have been delayed’ and are due for completion and acceptance testing in Q1 of FY 12- i.e. months late, and then available for sale after that…. But only 800k cash left at June 30 and a cash burn of 800k a quarter, and grant funds pretty much finished- will they have enough cash flow to make it to the end of the current quarter let alone Q1 without the "2 million" The next quarterly report should reveal all. The tension is killing me!

I also notice that buried away in the notes there has been an impairment charge effectively wiping out half the book value of the development costs of the technology – probably reflects the fact that the Beta unit is headed for the scrapheap.

I was amused that considering they have effectively slowed the Walkamin output to a trickle, they have trumpeted the improvements to the log yard to “cope with the increased production capacity of the BVU”…..ha!

Allow me to rehash a post from April- since then nothing has changed….

“ PPY Interest said: Based on the veneering speed from the Landline video, the Walkamin factorys veneering machine should be able to handle (if fully operational) around 900 billets per day, which should equate to around 900 Sq M of usable product. The company has delivered 1000 square meters to Egypt since the AGM last November. Over the four months to March, this gives a production rate of 250 square meters a month (62 sq M a week, or 12.5 sq m a day). Not exactly a stellar performance. The current rate of 12.5 Sq M per day seems minuscule. I wonder what the problem is.?

and I responded: To put 1000 sq metres production in perspective, it is the same surface area as 32 reams of office paper (albeit banana ply is thicker than office paper) - still you get the picture?. Imagine producing the equivalent of just 6.5 cartons of office paper in 3 months, or even 1 week- the floor of the office where I work alone would use that much office paper in a week!! (ok I know they aren't producing paper any more, but the comparison is still valid.)

I always harken back to the prospectus story- The "Alpha" machine was claimed to have ACTUALLY trialled at 0.8 metres per second production rate of raw paper, so at that rate a metre wide 1000 sq metres should take 1250 seconds i.e. 21 MINUTES to produce. Now, recall that the plan for the "Beta" machine was to ramp production speed up to 2.6 metres per second, so that would be 384 seconds or 6 and a half minutes! Also recall that it was stated that this speed was achievable because compared to conventional pulp mill line feeds, at commonly 8 metres per second, the PPY machine was pretty slow! That competitor 8 metres per second line would spit out our 1000 sq metres in 2 minutes.

It doesnt take a rocket scientist to work out that the current machine is not really working to expectations! We seem to have gone from a goal production of 2.6 metres per SECOND to actual production of something like 2.6 metres per HOUR. Phew, 3600 seconds in an hour: so the machine is a lazy 3600 times or more slower than expected? ”