Sunwin International Neutraceuticals Inc (OTC:SUWN) quarterly earnings came out really disappointing, but the initial reaction from traders could have been exaggerated as well.The annual revenue was down 35%. Justifying the decrease, Sunwin reminded of their plan to transit into all natural flavoring solutions provider from just a bulk supplier of stevia. The related costs of shifting towards a higher grade production were influential throughout the year. The Qufu Shengren facility was idle for half a year on retooling and another production facility was closed in December 2009.[BANNER]
All the factors were already considered in the price before the earnings announcement and thus the expectations were lower to begin with. The drop was more in support of pre-existed downtrend than a calculated drop adequate to the diminished sales.
What lies ahead is a business model change and thus a change in the related sales/cost structure, margins, and possibly more partnerships at some point. It will be a natural thing for the price to stick lower until the company draws new guidelines for what their market value should be.
The current cash resources of $12.7 million and the low indebtedness look attractive. The low leverage allows for more financial flexibility of the current assets and thus guaranties the partial restructure of production units to be as swift as possible.
