Multistack Faces Ongoing Negative Cash Flows Despite Solid Financing Backing
Multistack International Limited reported a net cash outflow from operating activities of $72,916 for the December 2024 quarter but ended with robust cash reserves of $975,608. Despite ongoing negative cash flows, the company remains confident in sustaining operations through secured financing and strategic asset acquisitions.
- Net operating cash outflow of $72,916 for the quarter
- Cash reserves increased slightly to $975,608 at quarter end
- Secured loans totaling over A$5.3 million from related parties
- Acquisition of Verdicorp assets supported by related-party financing
- Company expects negative operating cash flows to continue but has sufficient funds for next two quarters
Quarterly Cash Flow Overview
Multistack International Limited (ASX: MSI), a manufacturer specialising in water-cooled and air-cooled chillers, released its Appendix 4C quarterly cash flow report for the period ending 31 December 2024. The company recorded a net cash outflow from operating activities of $72,916, reflecting ongoing operational expenses exceeding receipts during the quarter.
Despite this outflow, Multistack ended the quarter with cash and cash equivalents of $975,608, a modest increase from the previous quarter's $949,037. This cash position provides a buffer as the company navigates its current financial landscape.
Investing and Financing Activities
The company’s investing activities showed a net cash inflow of $72,916, primarily driven by asset management decisions, while financing activities resulted in a net cash outflow of $27,500, mainly due to lease payments. Notably, Multistack has secured significant financing facilities totaling $5.3 million, including loans from related parties such as Super Link Company Ltd and A.C.R. Equipment (HK) Ltd.
These loans are strategically important. The $3.55 million loan from Super Link Company Ltd facilitated the acquisition of Verdicorp assets, a move that expands Multistack’s technological capabilities and product offerings. Another loan of approximately $1.09 million from A.C.R. Equipment (HK) Ltd, arranged in March 2024, is earmarked for ongoing operations, underscoring the company’s reliance on related-party financing to support its growth and liquidity needs.
Operational Outlook and Strategic Positioning
Multistack acknowledges that it expects to continue experiencing negative net operating cash flows in the near term. However, the company asserts it has sufficient cash reserves to cover these outflows for at least the next two quarters. This confidence is bolstered by the company’s strategic focus on its core business of selling, marketing, and distributing modular chillers, alongside the integration of Organic Rankine Cycle (ORC) technology acquired through the Verdicorp deal.
The ORC technology complements Multistack’s existing product line and is seen by management as a significant growth opportunity, potentially positioning the company well in a market increasingly focused on energy-efficient cooling solutions.
Governance and Related Party Transactions
The report also details payments to related parties, including $47,332 to ACR Equipment (HK) Ltd for purchases on normal commercial terms. The company maintains transparency around these transactions, which are integral to its financing and operational strategy.
Overall, Multistack’s December quarter cash flow report paints a picture of a company balancing operational challenges with strategic investments and financing arrangements. The ability to maintain a near-million-dollar cash reserve while investing in growth assets and managing debt underscores a cautious but proactive approach to sustaining and expanding its business.
Bottom Line?
Multistack’s cash flow dynamics signal a critical phase where strategic financing and asset acquisitions will determine its trajectory amid ongoing operational cash pressures.
Questions in the middle?
- How will Multistack manage its negative operating cash flows beyond the next two quarters?
- What are the growth prospects and market reception for the newly acquired ORC technology?
- Will the company seek additional external financing or equity raises to support expansion?
