Comfor Management Services Ltd. (CMSL) annual report shows a net loss of $716,564. It is the third consecutive year the company has recorded a loss.
The report, released on Jan. 25, 2012 is a detailed account of the activities of all companies in the CMSL group, including the Burns Lake Community Forest Ltd. (BLComfor) and Sheraton Holdings Ltd., for the fiscal year ended May 31, 2011.
Included in the annual report is the company’s audited consolidated financial statements for the year, which show a net loss of $716,564.
CMSL president Quentin Beach noted, “This is the third consecutive year that CMSL’s consolidated expenses have exceeded its combined corporate income.”
The losses are attributed to the on going down turn in B.C.’s forest industry which are continuing to have a negative impact on CMSL and its subsidiaries.
Unlike the two previous years, however, CMSL’s latest consolidated loss was the largely the result of a change in the value of the assets of one subsidiary, Sheraton Holdings Ltd.
“The temporary closure of Sheraton Holdings Ltd. in late 2010, as a result of poor market conditions, necessitated a $780,000 write down of that company’s saw milling assets, which in turn resulted in a net loss for the corporate group,” explained Beach.
“Burns Lake Community Forest Ltd. remained profitable during the period and CMSL would have posted a small profit as well if not for the asset write down.”
While disappointed by corporate group’s overall financial performance, Beach said the CMSL board acted decisively after taking office in October 2011 to limit the loss in Sheraton Holdings Ltd.
Sheraton was closed indefinitely in December and its customers were advised that it will not be able to deliver any forest products for the foreseeable future. At that time, Beach attributed the closure of Sheraton on continued poor demand for railway ties and timbers. A complete shutdown was necessary to limit losses.
“When the board purchased Sheraton in 2008, it had high hopes for the company.” CMSL purchased Sheraton Holdings Ltd. in 2008 for approximately $800,000 [less adjustments] from the Wiebe Family Trust and subsequently a share purchase agreement was made whereby CMSL still has an option to purchase outstanding preference shares in SHL from the Wiebe Family Trust.
Section 8, page 22 of the Sheraton Holdings Ltd. share purchase agreement indicates that as a condition of sale, Wiebe was required to enter into a five year management agreement with CMSL.
An advance to Sheraton Holdings Ltd. for $200,000 was also made in 2008.
“Sheraton Holdings Ltd. had always been a profitable operation. Unfortunately, the global economy experienced its worst downturn in nearly a century shortly after Sheraton Holdings Ltd. was purchased. Global economic conditions still haven’t improved dramatically and as a result, Sheraton’s traditional markets remain extremely soft.”
Despite this, Beach said, “CMSL, BLComfor and Sheraton Holdings Ltd. continue to make significant contributions to our local economy by providing direct employment to more than 35 local families,” he said.
Late last week, however CMSL announced that it would be reopening Sheraton Holdings Ltd. next month due to improved market conditions. Reopening the mill will create between seven and nine employment positions.
Beach went on to say that during 2010 and 2011, CMSL provided more than $102,000 in grant funding to local community groups.
“I wish to assure locals that the long term sustainability of their community owned corporations is not in question. CMSL and its subsidiaries have all implemented strategies designed to ensure they weather the current economic storm. Reserves are more than adequate to cover long term liabilities and all three companies have implemented strategies to ensure they emerge from this economic downturn leaner and stronger and poised to take advantage of any upswing in the economy,” Beach said.
According to Beach the strategies in place to ‘ weather the storm’ include; reducing staffing levels to a bare minimum, reducing expenditures to minimum such as eliminating a surplus photocopier which reduces monthly operating costs by $242, maintaining healthy cash reserves, corporate restructuring to eliminate superfluous companies and therefore reducing accounting and auditing costs, closing unprofitable operations until market conditions improve, revamping fiscal policies to create tighter controls on grant spending and selling surplus equipment.
“All these thing will help ensure long term sustainability. Strategies are designed to conserve cash reserves, which will ensure the companies have adequate capital in place to take advantage of new opportunities. If a new business opportunity emerges and the completion of a business plan shows it to be profitable in the long term, the companies will have adequate capital reserves to finance it.”