Keweenaw Land Association Ltd. :KEWL-US: Earnings Analysis: Q3, 2016 By the Numbers : October 25, 2016

Keweenaw Land Association Ltd. reports financial results for the quarter ended September 30, 2016.


  • Summary numbers: Revenues of USD 2.77 million, Net Earnings of USD 0.23 million.
  • Gross margins narrowed from 37.24% to 28.47% compared to the same period last year, operating (EBITDA) margins now 16.57% from 28.53%.
  • Change in operating cash flow of 36.69% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 3.61 3.09 3.26 1.78 2.77
Revenue Growth (%YOY) 13.39 2.72 7.17 10.33 -23.29
Earnings (mil) 0.57 0.32 0.25 -0.01 0.23
Earnings Growth (%YOY) 33.61 -26.93 75.47 -110.75 -59.44
Net Margin (%) 15.83 10.38 7.69 -0.73 8.37
EPS 0.44 0.25 0.19 -0.01 0.18
Return on Equity (%) 12.22 6.69 5.14 -0.26 4.65
Return on Assets (%) 9.22 5.1 3.98 -0.21 3.61

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, KEWL-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if KEWL-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 55.64% and earnings by 1,874.44% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 37.24% to 28.47%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 28.53% to 16.57% in this time frame. For comparison, gross margins were 28.25% and EBITDA margins were 7.89% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

KEWL-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 110.77 days, compared to last year’s level of 61.25 days.

Cash Versus Earnings – Sustainable Performance?

KEWL-US‘s year-on-year change in operating cash flow of 36.69% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 25.64% to 13.27% and (2) one-time items that contributed to a decrease in pretax margins from 25.59% to 11.71%

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Keweenaw Land Association Ltd.

Company Profile

Keweenaw Land Association Ltd. engages in the exploration, development, and selling of forest products. Its products include timber species such as Hard Maple, Yellow Birch, White Ash, and Black Cherry. The company was founded in 1908 and is headquartered in Ironwood, MI.

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