Scully Royalty Ltd. (SRL) Q4 2014 Earnings Report, Transcript and Summary

Good morning and welcome to the MFC Industrial Ltd. Year End Financial Results Conference Call. [Operator Instructions] On the call today are Gerardo Cortina, President and CEO, Sam Morrow, Chief Financial Officer, and Rene Randall, Vice President. [Operator Instructions] Please note that certain statements in this conference call will be forward-looking statements, which reflect management's expectations regarding future growth, results of operation, performance and business prospects and opportunities. For detailed information about risks and uncertainties that could cause the company's actual results to differ materially from those expressed or implied, please refer to the disclaimer for forward-looking information contained in today's press release on file with the Canadian Securities Regulators and on Form 20-F with the SEC. Please note this event is being recorded. I would now like to turn the conference over to Mr. Cortina, President and CEO of MFC Industrial. Please go ahead.

Thank you. Good morning and welcome to the MFC Industrial investors call. We thank you for being with us this morning. We are all in Vancouver at our Executive Office. We are excited to be able to talk to you this morning about our vision for the future. And our plans to grow and increase value to our main business that is global supply chain and price finance. We will also discuss our plans to rationalize certain MFC Energy assets and return a net proceeds for our shareholders as a return of capital with no withholding fact. But before we do so, let me briefly talk about our 2014 results and recent corporate development. Later on, Sam will talk to you in more detail about our financial results and then I will be back to talk about our ambition and future plans. Our revenue for 2014 increased 1.4 billion compared to 830 million over the same period 2013. This represented an increase of 73%. This increase was a result of organic growth and another one increase in supply chain revenue and a consolidation of our two recent applications. Net income before the impact of a non-cash impairment loss was 22.2 million or $0.35 per share. As of December 31 2014, we realized a non-cash impairment loss of 28.6 million related to our natural gas properties in Alberta, Canada. This non-cash impairment is directly related to the decline in long-term hydrocarbon price forecasts that we utilize to discount the present value of our reserves. With a lower pricing environment, despite the same amount of long-term hydrocarbon reserves remaining in the ground, the discounted value of these resources declined. This non-cash impairment, net of a income tax recovery impacted our net income by $21.4 million, or $0.34 per share. We are of course very disappointed of this outcome. But this is a result of the important decline in natural oil and gas, liquid prices that we have at the end of 2014. Net income for 2014 was $838,000 or $0.01 per share compared to 9.7 million or $0.15 per share for 2013. Operating EBITDA was 76.2 million for 2014 compared to 65.4 million for 2013. We are satisfied with increase in revenues. We clearly need to improve our margins and bottom line and this is what we will talk about in our vision of plan. Our balance sheet continues to be strong. Cash as of December 31, 2014 was 297 million. Total assets of 1.5 billion, long-term debt of 330 million and equity of 670 million. MFC Energy has been an important part of our business over the last few years. But moving forward, as we plan to locate as much capital as possible to our supply chain and refinance business and the fact that natural gas, oil and liquid prices are down over 50% from the 2014 level before prices started to come down at the end of the year, we believe it is prudent to rationalize these assets. A net proceed of certain of these assets after repaying the debt incurred to refinance acquisition of these assets will be distributed to shareholders as the return of capital we know we hold impact. We are presently working on a structure to implement this process, to enable the MFC management, to focus on our ongoing business. And on the other side ensuring certainty and stability for all stakeholders and maximizing the value of the distribution to our shareholders. Based on current market conditions in the oil and gas industry, this process will take some time but our objective is to maximize recurrence and therefore we anticipate an initial cash distribution to shareholders will be made within 18 months. The MFC Energy asset that we classify as scale for sale in December 2014 will be monetized and redeployed at capital to our trade finance business. We are focused on maximizing the long-term value of our assets and to preserve our natural gas reserves, we have initiated a program to curtail production at certain of our wells. Today this program has focused on our property in Central Alberta, that produce a higher mix of natural gas liquid. When production of these wells becomes economical, we will resume operations. We believe that this is a program is a prudent action in the environment and it will ensure that our natural gas remains in the ground while maintaining the flexibility to monetize our reserves when attractive prices resumes. On Wabush, I would like to say that during 2014 Cliffs closed the mine and until they terminate the lease, they are obligated to pay us a minimum lease payment of CAD$3.25 million per year. We believe that our sometime, at some point Cliffs will terminate the sub lease in which case we as landlord will let out side our stepping rise which will allow us to take back in mine and purchase certain infrastructure. I would like to thank the United Steelworkers Union Local 6285, the town of Wabush, and the local and Provincial governments for their strong support as we work together to re-open the mine. As we have stated in the past, I want to restate it again. Wabush has been an important asset for MFC in the past. It's an important asset today and we are working for Wabush to remain an important asset for MFC in the future. During 2014 we concluded two important acquisitions FESIL and Elsner. Both groups are fully integrated into MFC. These two acquisitions added a significant increase in revenue, geographical diversification, new products, customers and suppliers to our global supply chain business. Both companies together represented a contribution of 19% of our total assets and 36.3% of our revenue. Now Sam will talk to you in more detail about financials. Sam?

Thank you Gerardo, and good morning everybody. In 2014 our revenues increased to $1.4 billion versus $814 million in 2013. This was due to organic growth in certain products and the consolidation of FESIL and Elsner in our financial results. Cost of sales and services increased to 1.3 billion from 710 million in 2015 again due to growth in certain products and the consolidation of our recent acquisition. Selling, general and administrative expenses were $85.5 million up from $63.1 million in the prior year due to expansion into new geographies and markets, as well as the addition of FESIL and Elsner. As a percentage of gross revenue, SG&A was 6.1% in 2014 versus 7.8% in 2013. Finance cost of $16.5 million were up from $15.2 million in 2013 due to increase borrowings offset partially by lower accretion on our decommissioning obligations. In 2014, we recognized a net foreign currency transaction loss of $5.5 million compared to $1.8 million in the prior year. This loss is primarily non-cash and mainly relates to the settlement of some inner company accounts to pursue certain fiscally responsible strategies. Income tax expense was $1.7 million in 2014 compared to $6.6 million in 2013. Our income tax paid in cash was $4.4 million in 2014. So this number includes mandatory pre-payments in some jurisdictions which we will recover in 2015. We continue to strive to be fiscally responsible. Net income before the impact of non-cash impairment losses was $22.2 million with $0.35 per diluted share versus $14.2 million or $0.23 per diluted share in 2013. We recognize the non-cash impairment losses related to our natural gas properties in Alberta, Canada. This non-cash impairment is directly related to the decline in the long term price forecast that we utilize that discount the present value of our hydrocarbon reserves. In December 2014, our realized prices of natural gas and natural gas liquids fell 20% and 32% respectively. Net of a tax recovery is non-cash impairment loss impacted our net income by $21.4 million or $0.34 per share. Net income in 2014 was $838,000 or $0.01 per share versus $9.7 million or $0.15 per share in 2013. Operating EBITDA which we have defined as EBITDA towards non-cash impairment losses of hydrocarbon properties was $76.2 million versus $65.4 million in 2013. Onto the balance sheet, cash was $297.3 million up sequentially from $201 million in September to down from the $332 million we recorded as of December 31, 2013. In 2014, our inventory and trade receivables increased alongside our revenue growth primarily due to the consolidation of Elsner and FESIL in March and April respectively. On June 30 2014, the first reporting period which included both acquisition, our trade receivables were 207.6 million and our inventories were 205.7 million. Since then, we have reduced our trade receivables to 161.7 million while maintaining our inventories at 212.6 million as of December 31 2014. More than 50% of our inventories have been contracted to be sold at fixed prices, while the remainder is comprised with raw materials, work-in-progress and finished goods of our production facilities, strategic inventories such as consignment positions, and goods in transit. I would like to spend a moment to recognize our team in Vienna and in particular Mr. Ferdinand Steinbauer, who is our Group Treasurer and the Managing Director of MFC Commodity. They have simply done an incredible job integrating our recent acquisitions into the Group and growing our revenue while reducing our working capital investments. Vienna is the heart of MFC so I’d like to specifically acknowledge Mr. Steinbauer, and the whole team there and congratulate them for their successes and thank them for their contribution. Back to the balance sheet, current assets were $865 million, current liabilities $380 million, and our current ratio was a healthy 2.28 a slight increase year-over-year. Long-term debt was $313 million, long-term debt less current portion was $256 million. The increase in long-term debt sequentially was related to refinancing in the fourth quarter. Our long-term decommissioning obligations related to our natural gas properties in Alberta increased to $130 million from $106 million in 2013. The reason for this is that the risk free interest rates we used to discount those long-term liability declined in 2014 and we also updated our estimates of the cost to abandon or reclaim those assets to align with the Alberta Energy Regulators recent publication. Shareholders equity was 670.4 million down year-over-year due to the cumulative translation loss from the weaker euro in Canadian dollar versus the U.S. dollar as well as the payment of cash dividend. One thing I’ll note as part of our capital strategy, we meet our assets in liabilities to the extent possible. This includes both duration and currency. We finance our current assets with short-term borrowings and our long-term assets with long term debt. We continue to be responsible towards the capital. Book value per share was $10.63 at December 31, 2014 versus $11.18 at December 31, 2013 again due to the cumulative translation loss in cash dividend payment. So with that Gerardo, I will pass it back to you.

Thank you, Sam. So let me finally talk to you about the revolution for the future. Our main business today is lower supply chain so we’re supplying a wide range of products such as metals, alloys, minerals, chemicals and wood products to different industries around the world and providing a wide range of trade finance solutions to both consumers and suppliers. MFC's global supply chain business is active world wide. We have offices in Europe, North America, Latin America, Middle East and Far East. Recently we opened offices in South Africa, Houston Texas, to cover the South of the US and San Juan, Puerto Rico to cover Central America. Through these network of offices and a global network of agents, we're active on one-time sourcing and delivery of products on predefined terms and conditions to consumers in multiple industries. On the supply side, we have been able to expand our secured sources by update, marketing or agency agreements and we’ll continue to do so in order to expand our offerings to the market. Going forward we intend to substantially grow our trade finance business and improve profit margins by offering new and complete trade finance services and solutions to the established value chain. To support and be able to expand our trade finance business, MFC was partnered with a European bank that will become our in-house bank. Through our in-house bank we will be able to expand our trade finance business into a wide range of new services such as financing, factoring, forfeiting, marketing and risk management. Through our in-house bank we will also be able to grow our supply chain business by expanding the services we offer to our customers. We're not getting into the banking businesses. Through our in-house bank we're looking to expanding the services and solutions that we offer to our existing global supply chain and for financing network of customers and suppliers and improve our margin. This will enable us to expand our business with our existing banks or with a long standing relationships. Our head office of trade finance business will continue to be Vienna but we will have specialized trade finance teams in some of the different locations where our supply chain business is active. Successful trade finance efficient to customers and safe to lenders requires both expanding customer relationships and knowledge and experience in products, market, concrete risk, collateral management and credit management. These are our strengths. This is our competitive advantage and this is the reason why we're excited or optimistic about our future. Thank you. With this we've finalized our presentation. Operator, we're ready to start the Q&A.

[Operator Instructions] The first question comes from Joe Pratt from Stifel. Please go ahead.

Hi good morning. Is there anyway to give us an idea if all the acquisitions had been made on January 1 2014, would you had revenue growth or not?

Thank you, Joe. The two acquisitions that we're talking about FESIL and Elsner were concluded in March and April 2014. So in our 2014 results, we are including nine months of the revenue.

Okay. But pro forma, were you up or down on revenues?

We are substantially up.

Okay. But if you look at all of the businesses that you own in 2014, what were the revenues of those businesses in 2013?

Excuse me, can you repeat?

What were the revenues of all the businesses you owned in 2014 for the year 2013?

Sam, do you have that number. Hold on a second Joe.

Okay.

So Joe, excluding Elsner and FESIL we still would have reported revenues greater than $900 million.

Including?

Excluding.

Yes, but including, what would it have been?

Sorry, you’re asking what the annualized revenue would have been with Elsner and FESIL in Q1?

Well in 2013?

It's a little bit difficult to say specifically because in 2013 one of the furnaces at the FESIL run-off plant was down for five months. So there's no real way to do that type of pro forma calculation, but -

But then let me really move on, was there generic growth on these businesses in 2014?

Yes.

Okay. And then what was the gross margin in 2013 with all the businesses and what was it in 2014?

Our gross margin in 2014 was 10% and 12.7% in 2013. The declined gross margin is a result of the incorporation of FESIL and Elsner as they operate with a lower gross margin in highly competitive business mainly Europe.

Okay. That’s very helpful. And one other question would be, do you expect gross margin improvement and revenue improvement in 2015?

That's what our plan is all about Joe. We will have - I mean both increasing revenue does by consolidated - FESIL and Elsner and our plan to engage our business is all based providing new solutions to our customer to improve customer chain customers and these growth opportunities. If you look at our business today at least 61% of our business is in Europe, and it is a very competitive market especially when we’re talking of steel and around the industries. So the only way, we have increased our market is to provide new solution and new solutions store customers and that's what our plan is all about.

Okay, good. And how much will it cost you to bring this bank in-house?

We are presently evaluating different alternatives and we close to have final decision over the next month and our plan is to definitely have everything in place and operating before the end of the year.

Okay. Thank you very much for answering my questions.

The next question comes from George Burmann from J.P. Turner. Please go ahead.

Good morning gentlemen. Thanks for taking my call. The numbers aren't looking too bad, huge revenues obviously the bottom line at least something to be desired, how are you working with the currently very, very low Euro currency. Is that going to hurt us going forward or are you seeing any profits from the definitely picking up economies in the European Union?

Sam, would you like to comment on that?

Sure. So I mentioned this earlier George, we do match our assets and liabilities but from a balance sheet standpoint, we are quite comfortable. In addition, we do have a lot of export from Europe to other countries as an example we export or FESIL exports certain alloys from Europe to the U.S. So those depreciated euro has actually been quite a help.

Okay. Consolidating the cash dividend I didn’t catch the full press release, did you eliminated cash dividend?

Yes George, our [indiscernible] for a dividend based on all the other announcements that we’ve made to date.

Okay. And the non-cash charge basically reverses some of the bargain purchase gain you had about year ago, right?

The bargain purchase gain was recognized in 2012 but we don’t think that this is related to that. Our view is specific, so we had to deal with the decline in the long-term pricing of natural gas and natural gas liquids in the end of 2014.

Okay. And you basically now feel that given time natural gas liquids, and natural gas prices will appreciate some and at an opportune time you are looking to sell this asset off?

Well it’s very difficult to talk about future prices. We definitely hope that will increase and that's why we don’t turn off the blocks in to sell these assets, we are looking time frame of around 18 months to distribute the net proceeds to our shareholders.

Okay. If the Cliffs Corporation terminates the lease, would you have – would you be looking at another non-cash charge on your asset there or did you never write that off?

We will review our [indiscernible] signed in our book and meantime there is no improvement.

Okay. And given your book value of $11 a share, stock price at $4 a share, how do you feel we can narrow that gap off?

Well that's what our plan is all about. As I said already our revenue we are very satisfied with increasing revenue but we have to reach our bottom price and that is what is all about. We are optimistic of the future with our long standing relationship with the banks and our very strong and diversified customer base. We are optimistic that provide all these new services and solutions will help us increase our bottom price. And with that you know what our stock price will do.

Okay. Could you be a little bit more specific about your idea about House Bank it would not be that you acquire a banking charter, but you have one bank that you primarily work with correct?

Well at this time we have not finalized this bulk. We are looking at different alternatives, What we know is what we need to bank. We are definitely not interested to get in banking. We are interested in the front room of the bank and not in the back room. So we will outsource all back room services. And I don’t know it have been a company for some years, but starting with baseline and up to the late 2000 MFC already owned bank and MFC has experience to run an operate bank. So as I already said, product was next two three months was finalized after and our plan is to have these run before the end of the year.

And George this is really all about adding additional services to our current portfolio of offering. So the only way we’ll increase our margins going forward is to offer more services to our customers and that’s really what’s driving this decision.

Okay, all right. Thank you.

The next question comes from William Meyers of Miller Asset Management. Please go ahead.

Can you give us a little bit of color on how Q4 compare to Q3 and any comments on what you’ve seen on the stock Q2 2015 would also be helpful. Thank you.

Revenue of Q4 was $391 billion and very similar to Q3 business. So Q4 we have $391 billion and Q4 we have $392 billion.

Okay. Thanks.

The next question comes from Joe Pratt from Stifel. Please go ahead with your follow-up.

Thank you. I just want to clarify do you have two asset groups for sale?

Joe, no, the MFC Energy assets will rationalize. The assets that we would just for sale in our - as of December 31, 2014 we will rationalize and the capital will redeploy to our play finances.

But to clarify Joe, we do have our Niton assets, which are classified for sale, which are on our balance sheet for about $100 million just on the asset side.

What do you call those assets what was the name?

What was that you were referring?

What was the name of those assets?

The MFC Energy assets, which we have classified held for sale are Niton asset.

Okay, how do you spell that, Niton, N-I-T-O-N?

Yes.

Okay. So the Niton assets were held for sale for $101 million is there another set of assets held for sale?

We have an investment property in East Germany, which is held for sale, we’re about $30 million.

Okay. That clarifies and relative to last comment my phone wasn't working properly from an audio point of view what was the statement about - how the first quarter revenues of 2015 when compared to the fourth quarter revenues?

Very similar. We have $391 billion quarter in the fourth quarter and $392 million in the third quarter.

Okay. Thank you for that clarification.

The next question comes from David Erb from Merrion Investment Management. Please go ahead.

Thanks for taking the question. I was wondering if you could provide some detail on what exactly is taking place in Uganda with hydro facility there some sense of what cash flow and the go forward view would be. In addition if you could comment on any potential recoveries with respect to the Goa situation. And then lastly, to please address the financial side of the Alberta Power arrangements, which I guess you’ve set up as a peaker there?

Thank you David, Rene would you like to start with Uganda?

Sure, Uganda is power station. It is operated at this time, it’s separate from the refinery that is still there where revenues are about $3.8 million a year and progresses very well. I mean we’re just waiting to see what happens with power position I mean with the refinery at this point. And we're setting on Goa, we really have been watching Goa we’ve already sold our investments in Goa as far as I know that I said some mines have come back, but not all and I don't think that any of the ones that we were involved have come back.

And David today there are no prices at the level they’re. This morning $1 it’s very difficult for the Indian to supply Chinese ore - Indian ore to Chinese.

As part of that SPA, - David, this is Sam there were future gains on free cash flow which would have been entitled to and we continue to believe that that will be zero. Your question on the Alberta power plant final commissioning has not yet occurred, we’ll see that in June of 2014, first sales for the grid will be in May. So we are excited about this little project, but it’s a little project and picking option is one of our options to begin we’re going to be running that plant 100%

Thank you.

The next question comes from Gregg Abella from IPAM. Please go ahead.

Good morning, gentlemen. Okay, so if I’m hearing things correctly here generally you’re pretty confident with the evaluation marks of your assets and your lines of business I am assuming and the balance sheet seems like it’s relatively still liquid. So why wouldn’t you consider a buyback when every share purchased at this evaluation would be more than 100% return on your money?

Sam, would you like to answer that.

Sure. So I will -- we’ll say we are not relatively liquid, we are very liquid. So in my -- all of the other announcements that we have made today, our Board did not and we’ve spoken internally about this point of line. And we continue to believe that share buyback only work if they are really big. So we don’t have substantial liquidity in our common share that’s a consideration. In addition, we want solidly capital to our refinance business and some of our long-term projects such as Wabush will require capital as they move forward. So for now our Board of Directors is deciding to purchase any shares in the open market. So we can have this conversation with every board meeting and we appreciate your feedback.

Will management be buying shares to give a sense -- a vote of confidence that at least this evaluation can be supported?

So we are currently blacked out until May 18 and we all know that.

Fair enough. To what degree do you intend to, I mean it's not a complicated story but there are many moving parts and Wall Street tends to shoot at what’s moving. To what degree do you intend to come to the United States or other parts of the country and tell the story to Wall Street? One of the ways that you get an increase in evaluation is by having better exposure to the Street. I’d say that’s one are of the company has been severely lacking. So what’re you going to do about it?

We have to live with that and we look very active.

Okay. So what's lined up so far?

We have nothing -- no definite plans, but we will be in New York about the next two months. And Gerardo live in New York.

Okay. I mean living in New York and talking to Wall Street very different things. So I’m glad to hear at least you are going to be telling the story a little more often because - you are putting out of press release that you don’t understand why the stock is down is not the same as talking about why the stock should be higher.

Thank you.

The next question comes from Raymond Hall of [CFE] [ph] Incorporated. Please go ahead.

Good morning. Thanks for a taking my questions. Can you come down at trade finance section for me little bit? I see you worked it out, but I’m seeing revenues of $12 million and EBITDA of $16 million. How does that work? A – Sam Morrow: Sure. So our trade finance is we have renamed all of our segments. So now we’ll report three segments going forward. The first is global supply chain, the second is trade finance and services and third is other. In 2014, our trade finance and services segment included a gain on sales of one of our subsidiaries to the income from operations was higher than revenue.

Okay. The asset for sale you just mentioned whether the Niton assets and I think you said some German real estates is the German real estate is that the old SWA REIT real estate?

Yes, it is.

Okay. Now with the elimination of the dividend, was that a decision made in part due to the fact that you plan on returning capital or was that just a bit decision in and of itself?

No, I think the decision was made in Europe all the announcements that we are making.

And in light of that if I remember it correctly I mean the Niton asset is pretty much in for sale since I guess you purchase Compton. So I guess what gives you the confidence that those assets will be sold here in the next 12 to 18 months?

We can have some interest in these properties. As we have mentioned the oil and gas market [indiscernible] with the pricing is depressed, but we are confident that any other market we will have better timing and if our resource are there which have good stuff to see so we are confident that we will able to sell it.

Two things that I will add to that Raymond is when we announced our participation agreement for those Niton properties we reclassified different facility and the probable reserve out of being an asset held for sale through our long-term asset. We always assume that the partner for this participation agreement would ultimately acquire those assets toward that this would just be the beginning of much larger deal. That didn’t happen as quickly as we wanted it. So in September -- I guess it was October we reclassified the plant and the probable reserve back to our assets held for sale and we have been very actively marketing them ever since.

To help make it this sort of straight my mind, I guess the assets that are also sort of segregated for return to capital those are also Compton assets. I guess they helped me out, which assets are you keeping and which one you want to sale?

The assets which are held for sale at Niton, we are keeping reallocation to our other businesses. And our other MFC Energy assets which are classified as long term, we will rationalize in a prudent manner over a period of time.

Okay. Thank you.

The next question comes from [indiscernible] Samuels, Private Investor. Please go ahead.

Hi. Thanks for taking my call. In terms of the return of capital the net long term assets value they are $101 million. And I am wondering two questions; one, is that a fair in your assessment estimates of the value of the properties at this time? And number two when those properties are disposed so I noticed there is large decommissioning liability and how far will that be gone to [ph] rid of it, if there any risk that you might get rid of the property and something will go bankrupt and that could hit back your way? Thanks.

Sure. We are confident with the evaluation of all these assets on our balance sheet at this time. When it comes to the decommissioning obligations so these are related to wells and facilities at international gas properties so they are really inoperable from the asset themselves. The average duration of those liabilities is about 15 year, but there are regulations in Alberta which we are considering when it comes to any potential disposal. So we wouldn’t pursue any transactions which we would have residual as certainly.

That's all.

Thank you.

And we have a question from Rich Rogers from Abbey Capital. Please go ahead.

Sure. I just had a quick question. You mentioned that the window opens for insider purchases on May 14. I was wondering why normally would be within a week or so after earnings release, is there a reason why it’s prolonged out to May 14 and then after that how long is that window open?

I am sorry I think that would be 18 is after we report earnings and we report earnings on April 15. We do have an insider trading policy which stipulate that we're not able to acquire shares in the open market until three days after we report and we're not allow to acquire shares after the quarter end, so because we're reporting on March 31, that window push until May.

So, how long is the window -- I mean, you pretty much since the last time you reported when was the window open between I think, last earnings quarter was it is in November of last year and then between November and now was there ever a window open that you could actually purchase shares?

I'm going to have to check that. I don't specifically know that's top of my head, how long that window is open before the quarter closes. But I can get back to on that Rich.

No. It's a five month period where to start trading where it is. I mean, it seems like the shareholders are absolutely not on the same side of the table as the management simply because the financial interest of the management is their salaries, bonus and traveling, entertainment expenses where you’re not getting damage financially when the stock is cut in the half so there is really no financial incentive to you and management to actually care about the stock in any way is what I see. And I know Mr. Anthony is the President, CEO got 500,000 shares resulting from his coming of the company, and his Mexican company being bought out. But that's not open market purchases, so that -- if we knows where that valuation came for those 500,000 shares So, when the stock is cut in half you guys don't get damaged in anyway, because your salaries and your bonus is continue to go on. So I'm trying to figure out how we get on the same table and as a shareholder I continue the hold one of the stock.

Rene would you like to take that.

You know we all have stock option plan and so, yes, it does effect us.

A stock option is an option to purchase the shares you don't have to do that that's not going to financially affect you in any way because you benefit.

That's where a lot of our incentive is.

If it doesn't seem like we're lined up on the same side of the table, the more money the finishing will be keep in the bank, obviously that's a benefit, every dollar spend out of the bank, out of the company's bank account as one must share – one must dollar that management can use for other purposes as far as income and salaries and things like that. So I just -- five years of the stock being cut in half where the opportunity lost and doesn't being up, 300% like the S&P were down 50% over five years. So obviously the performance is not commensurate with holding on to this. It just doesn't make any sense. Any thoughts?

Number one, we are in an industry where commodities have been falling dramatically and we're trying shape our focus a bit so that we can try to recovery backup and also expand our business, so we're not so reliant just on commodity prices.

If I do comment what are doing, I'm changing your focus area and your direction because it wasn't working out. That's not easy to do, it’s hard to doing that that's very commendable. But I just get probably about 40% of your flow tied with -- Mr. Miller [ph] and Mr. Kellogg that much float out there. And for shareholders this is nothing for us grab on to here, because it doesn't seem the commitment to the shareholders is there, so I just going forward over the next year we have absolutely no idea whether he is going to make money, lose money or -- and there's really nothing in place other than dividend getting flat, that's all, you know, as action speak louder than word. Although we have left out of this call is that we're not going to get the different and there is no intension of buyback shares. So that's doing so 25 years managing a lot of money, that's what I see.

Rich, I would like to clarify aside that our trade Finance and global supply chain is our main business. We are active worldwide and we have a substantial [indiscernible] the market what we are active are 61% Europe, 29% North America. We are active in Steel and foundry, and steel products, wood pellets those are our main business and they are very competitive. So we have had an important increasing revenue, but we have been through on our bottom line and that’s what we are planning and that's what our vision is. We plan to expand the services and solutions that we get our customers. And we see that we have many opportunities especially in companies or in markets with finance new lease or they’re being on higher financial cost. We have many opportunities. So our focus is to concentrate our business in our main market as indeed to service that we have been provided for many years.

No, that's all very nice. The market cap on your stock is on your companies $256 million. So as a publicly traded company with EBITDA $76 million last year and hopefully you would be $50 million plus this year why would you throw - to keep shareholders involved in a smarter money involved why would you throw bone and say we’re going to buy back up to $60 million worth of stock - at a $259 million market cap. So two years from now when you actually revenue and your earnings per share and your earnings increase it’s going to be on 48 million shares, which your stock will be 18 to 20 it’s just I mean went through a pretty good business as a whole. And it just doesn't make sense that you wouldn’t do that and then as we see the results as now we have less than what we showed up at this meeting and stock is still down 50% that’s why we’re walking away with a promise two years from now to get paid off if you sell some assets that are under water. So that’s what we see in it for the market cap of $256 million don't have to buyback it’s not are your cash flow over the next 12 month couldn’t be - wouldn’t be a detriment in anyway shape of and it also show that you’re somewhat cognizant of the pain the shareholders the last five years have gone through. So that upset a lot and but I do recommend you guys on changing new direction when things weren’t working about.

Thank you.

And the next question will come from Tony Pollock from Aegis Capital. Please go ahead.

Good morning. Can you hear me?

Good morning, Tony.

Could you give us little clarity on the iron ore project and with the prices where they are whether you think if you end up owning the property it is possible to these prices to be profitable?

Yes, Tony. As we all know, iron ore has the lowest price today of $51, that's on the 62% iron ore definitely that makes it difficult. On the other side, there are some positives the shipping market, the shipping cost to China to Europe and to the U.S. from Canada is way down and the Canadian to U.S. dollar exchange rate will also be a positive effect. At this time, we have no production this season in case that we step back into the mines when this project will be restarted any such decision will have to be based on service demonstrating, economic, and technical ability. So we’re – as we have stated, we’re very confident that long-term this is a very important asset for MFC all stakeholders as I mentioned in the call, we have been working together. So the only thing I can say is we’re optimistic, but we cannot give you a timeframe at the present time.

What is the next payment due from the companies at Elsner?

They pay on a quarterly basis.

So today?

No in April, the April 25 yeah probably around the end of April.

Okay. And are they officially in bankruptcy?

No, they just have one property in Eastern Canada that’s in CCAA.

Okay. Thank you.

And the next question is a follow-up from David Erb from Marion Investment Management. Please go ahead.

As previous caller just asked the same question, I was going to thank you.

Thank you, David.

The next question comes from Joe Pratt from Stifel. Please go ahead.

Hi, just to clarify it sense me like the assets held for sale net are $30 million for the German real estate and $55 million for Niton. Am I correct?

Hold on a second Joe.

No so sorry Joe it would be $30 million for the German real estate and then there is a $100 million that’s allocated for the Niton assets in Alberta, Canada and associated with those with Niton assets there’s about $15 million of decommissioning obligations, which is shown on our balance sheet as our current liability of the assets held for sale.

Okay so if you sold the two of the accounting value itself for German real estate for $30 million and you get $85 million for the Niton assets if you sold at the accounting value?

That’s correct.

Okay. Thank you.

And we have a follow-up from Craig [indiscernible]. Please go ahead.

Thanks one more quick question, I just want to make an additional comment based on what a caller had said a couple of quarters ago. And I had asked the question about whether or not management intends to buy back stock. The problem and I want to see management of course step up and buy some stock, I’d like to see that and so the most investment managers. The problem of course comes about as if the purpose of cutting the dividend and then not buying back your own stock, when the stock is low is to keep the valuation low. And then use your own personal assets to buy more of the company to put more of it on your side of the Board at the same time that you could have bought back stock as a company. It’s in my mind sort of a breach of fiduciary duty, because you’re sloping an opportunity that the company could have used to make all us larger owners now you’re going to use that opportunity to enrich yourselves buying back stock at less than 50% of book. Can you comment on that?

We’re prudent fiduciaries of our shareholders capital. Buying back shares is a Board decision when it comes to the company’s capital and given all of the announcements that we’ve made today. The Board decided not to repurchase any shares in the open market.

Yeah I understand that, but for example if your Board and your largest owners have sort of a strategy here to get control of the company by owning 51% by using your Board, the Board’s individual ability to buy the stock at a 50% value and not using the company’s assets that would have enriched all of us, I think that’s a problem.

The Board is not buying the stock right now.

Okay. But the Board members have if they’re buying stock or the management has.

No, no they’re not, they cannot.

Okay do you all see the point I’m trying to raise?

No, but you’re saying the Board or management is buying a stock and we just said we’re in a blackout.

I’m saying that if when the window opens you intend not to use the company’s assets to buy back stock and you’re not going to declare a dividend and that keeps the stock price low. But then you personally decide that it’s a good opportunity and then individually when the window opens you all decide to basically you guys you serve the corporate opportunity?

I did nobody said we’re going to buyback stock.

And just to be clear our focus here is maximizing the value for all of our shareholders over the long-term. There is no intention to keep our stock price low today. We’re all very conscious of where the stock is and we’re all very disappointed where the stock is. Our Chairman owns almost 33% of the company Gerardo, owns a significant portion of shares. Our Managing Director and our Treasurer also owns significant number of shares and many of our other people are motivated and incentivized by stock option plans that they have in place. I can promise you all of our incentives are aligned to do what’s in the best interest of all of our stakeholders and all of our shareholders over the long-term and that’s what we’re focused on.

Okay well I’d like to see that more now and obviously it sounds like there are couple of other disappointed investors here, but I – what I would not want to see is that the largest owners, the insiders basically decide to use this low price as an opportunity to buy the stock at a cheap price for themselves when the company could have done so?

Okay, yes, we already said that’s not the case.

Okay, well we’ll make sure that doesn’t happen.

And we have a follow-up from [indiscernible]. Please go ahead.

With regard to Wabush do you have any guess as to Cliffs walks away from your lease how long it would take you to get that backup and running and at what cost assuming market conditions were right?

And Raymond we expect at least we’ll terminate the lease, but we cannot speculate when. In the meantime I mean we’re happy to receive the lease payments that as we just said the date has been on time on a quarterly basis. Now we cannot once we take back the mine we will have to continue certain lease to make sure the visibility of technically and economically of the mine. So now at this time we cannot give you a timeframe and also I mean really soon or later the market will turn around I mean today the [indiscernible] market is way down and we’ll just have to wait.

Yeah I guess my question was more of long on if market conditions or how long does it take to like better term rehabilitate a mine or get it back up and running, I’m not asking to predict when that will happen just if conditions were right and you started today how long does that take?

Look the only thing that we can say is that all the assets in the mine are very well kept.

Okay.

That leads us on a very good job keeping these assets so that will certainly be of help. And I would say that it would take probably I don’t know six months to a year to get the mine back in inflation operation.

And any guesses and the cost involved in that?

No, no we cannot give you a number right now.

Okay. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you. Well I’d say we have talked today, we are very satisfied of our revenue growth and we have a plan, we have our vision, to make our bottom line grow. Our main business as we have stated over this call is global supply chain and trade finance. We believe that with our in-house bank we would be able to provide new services and solutions to our customers and that will bring up our bottom line. This includes financing, factoring, forfeiting, marketing, and risk management. We have been doing this for many years and this is what we know and these are our strength. So we thank you very much for being with us this morning and good bye.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.