LVT's hiring blitz.
A question from a Member here share with you all, always feel free to post in the lounge:
" Hi Paul, a quick question on LVT for you, which I started to post on TS.com but thought I should run it to you directly instead (I can always post it later if you want):
"LVT looks as exciting as ever with so much cash, no debt and such a large backlog (and broad range of customers, geographically and also entity-wise).
"However, in the midst of these uncertain times the company is hiring almost "like mad" (<<The company now has a staff of 138 vs. some 98 when I visited them last at mid year 2008. Surely business is brisk and expanding for this company.>>)
"On the one hand this is reassuring (surely they really must have the business in hand to support this) but at the same time it at least raises the question of whether they are hiring at least some people "on spec," assuming (or hoping) they will have the business to keep all the new people busy. Are they possibly "front-running" all the Keynesian stimulus programs, just a little?
"Obviously, such an approach doesn't jibe with anything you've told us about LVT's (conservative) management, but I wonder whether you picked up anything from them (explicitly or otherwise) about just what projects, or what changes in business climate or in competition, is supporting a 40% increase in staff, just as the world seems to be slowing to a crawl. Have they ever hired so many people so quickly before? What accounts for it right now? "
This is a good question and here is how I just responded:
Good points. Thanks. Maybe it should be a concern but I don't think so.
Here are just some initial thoughts just before lunch:
1) Since profits have soared in the past couple of years and it looks likely to be sustained this year, it makes sense -even essential- for the company to have far more workers, as its mostly a service industry and there are no inventories to speak of. (The company claims Brazil and India keeping doing "very well" and I am convinced a "green industry" pick like LVT will increasingly be desired and valued in the next wave of what will in vogue . The green/clean leaders and related industry providers of such).
2) It would be most disturbing in fact if business had picked up like it has for LVT and at the number of new workers only inched higher as compared to mid 2008.
3) The company does seem confident in the near future that at least this entire should be as good as '08 -and this struck me with a tone of conservatism (?). I also heard that some income of '08 had to be pushed into '09 for some whatever technical reason. I expect the company will continue to announce newly awarded projects and it seems to be a leader in what does. LVT does not have to tie-up much capital to do business due to a very good working relationship with Standard Chartered Bank.
"LVT is very well known in the global cement industry", states its founder. Why would he/they now blow it by over hiring? He just subscribed to 12 mill. new LVT shares, converting from the warrants held.
The chairman said us "its wiser to perform and speak little then to speak and hope to perform", or something like that. These are some reasons why I know they are conservative. Could even be they are getting this company ready to be sold one day for 4-5 Baht a share? Nobody knows but it’s a valuable business going forward for all the reasons stated, not the least the very high dividend coming.
If the Thai Baht weakens a bit vs. say the US$ or EU, as some think, it would be good for LVT earnings as most all its revenues are set in those currencies.
I remain a high fan of LVT for now awaiting the dividend announcement be the made by the end of this month as I understand.
Comments are always welcome! Feel free to comment on this or anything regarding LVT, with the "Add a new Comment" feature, as shown below.
Best Regards,
Paul A. Renaud.
