the beautiful young puppy is thriving, page-8

Gee I must remember to visit the PSH thread more often all this excitement and I missed it until now.

GPASAS:

You are obviously a newby to HC - There is no doubt that you get thumbs up when you preach to the converted. However i9n every other stock I follow it has always been when you support management. I tend to be contrarain (sp?- must be having a bad hair day).

I used to have a sizable chunk of PSH. I bought into the company after London city equities had bought in at what in today terms are way over the top pricing. It plunged from over a $ to around 68c. At that time LCE (quoted on asx) attempted to replace the chairman (Mr Heard) and the newly appointed Md David Trebeck. One nice thing about being listed on the ASX is that you can role back a very long time. It made very interesting reading about the past of LCE.

The proposal was defeated despite a number of institutions agreeing with LCE. It then unfolded and David Trebeck took over as chairman and Mr Heard retired.

Why delve into this?

I think it is important to look at the past as past behaviour has a high correlation to future behaviour. We also learn from history that we do not learn from it.

During this period the share price had rebounded to the early 90's. I must admit I was not overweight I was in fact obese relative to this stock and my portfolio.

I researched and researched - less about Solvay if truth be told and more about the parties involved.

The questions I could not answer are the following;

1. No volumes had dropped in fact the problem looked like a forward exchange hedging program was implemented at exactly the wrong time. Why would they have started this. I couldn't understand it. PSH has a market that trades in US$ so when the A$ is high the receipts are lower but that normally coincides with a top of a resource cycle so they should be pushing maximum volumes out there. The bottom is when the US$ is highly and then they are protected in that the A$ receipts are higher and volume may be lower. This looked like the perfect business in which not to play the currency hedging game. However the first time they put their toe in the water they get nailed. The CFO is an ex Adelaide Bank director as well.

2. The Bi carb plant is relatively new and pumping returns but they seem to be absorbed into other areas.

3. I could not understand how stocks could have got so out of control. This business should be relatively small and simple you control the Aussie market you import the excess need in upswings and export in downswings. Its all marginal costing.

4. The way forward plan absorbed large amounts of cash but the results in cash flow from operations did not improve.

5. I asked a whole bunch of questions and Cable guy really gave me a local insight. It seemed that the expansion of the mine and the enhancements being made to the plant were also in fact creating their own weaknesses elsewhere.

I came to a conclusion that I could not lump this company into the GFC fallout and that at times if you read through the set of circumstances the business was very reactionary. That they had made a number of mistakes and had woken up very late to these issues. Please do yourself a favour and read chronologically through their announcements since late 2006 it makes interesting reading.

I think that had they not got LCE to become a cornerstone investor there were a series of events that could have been really serious. Its clear from how that relationship went that LCE never did an adequate due diligence. It is also clear that LCE wanted to take charge - read their latest comment on nav on asx.

I decided that I had to sell off as I couldn't stand the risk. I love investing in monopolies especially those that cannot be attacked easily but the whole saga surrounding LCE the mistakes they made everything just made this a business I couldn't trust at that time. I have watched it and remained on its register to keep a watching brief as I think that David Trebeck is very good and could turn this around. The profit downgrade was a bolt out of the blue. I was looking to buy back in in the low 30's but avoided.

Bacci has a good technical aspect IMO and you cannot compare European plant with the one here in Auz. My experience is that the Europe based manufacturers refer to the plants opening date but the equipment in the plant can have been replaced many times over. You can see this even in paper mills - They cut the old unit out and replace the whole line but the start date stays the same. You need to understand why ICI sold.

I still think it could have merit but the risks are a lot more than one gets from the broad paint brush. I dont know why they lost money over and above the hedging. I just dont get it it doesnt stack up.

Only small holding to be on register.