My thoughts on 3rd quarter report just released. Disappointing...

My thoughts on 3rd quarter report just released.

Disappointing to see cash on hand going backwards. I had hoped we had already turned that corner. They still have $1.8M in the bank, but had a net operating loss of $660k. You can see working capital reduced significantly in the cash flow statement as you would expect since they sold less beer, but the fixed costs are still there being, well, fixed.

Gage Roads branded beer still selling very well. I like the commentary about moving into new channels to market that are not controlled by Woolies. Unfortunately we have no idea how much revenue this contributed, having just started in Q3 probably not a lot, but long term this is a very good thing. Just need to scale it up.

Contract brewing, called AQB, is still the problem, and the biggest contributor to revenue. In Q3 it seemed to be a big problem. Two brands they were brewing for somebody else were discontinued. The very next sentence talks about how this volume will be replaced in Q4 with new brands with higher volume expectations, and the whole declining trend being reversed. My question is how guaranteed is that replacement volume? Have contracts been signed, production and sales commenced since we are already a month into Q4?

For the final year results, a lot hinges on that replacement contract brewing. Management commentary talks about how these new contracts will reverse the decline. However I prefer the cash flow statement to do the talking rather than management, especially when management is an unknown factor to me.

I won't be selling my shares at these prices, and if the price gets silly cheap I will probably buy more. For now I'll put them in the bottom drawer and wait for the final year results.