What Investors Must Know About Riverstone Holdings Limited’s Latest Quarterly Earnings

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Riverstone Holdings Limited (SGX: AP4), a manufacturer of specialised cleanroom and healthcare gloves, announced its second quarter earnings yesterday.

Listed in Singapore but based in Malaysia, Riverstone is a global market leader in the manufacturing of nitrile and natural rubber cleanroom gloves and premium nitrile gloves used in the healthcare industry. The customers of its proprietary RS Riverstone Resources branded gloves are leaders in the hard-disk drive, semiconductor, consumer electronics, pharmaceutical, and healthcare industries.

For the second quarter of 2014, Riverstone’s revenue grew 7.1% year-on-year to a record high of RM96.9 million. The top-line growth was due mainly to an increase in demand for its cleanroom and healthcare gloves. Net profit increased 11.3% from RM14.4 million a year ago to RM16.1 million.

Mr. Wong Teek San, Executive Chairman and Chief Executive Officer of the company gave further insights on how the company achieved its latest quarterly results:

“Our overall two-prong growth strategy with a focus on both cleanroom and healthcare glove markets has enabled us to push our revenue and net profit to new heights as we report record high figures this quarter. With our provision of customized solutions, we establish our competitive advantage to grow consistently amidst a competitive landscape.”

The balance sheet of the firm looks robust. As of 30 June 2014, Riverstone had a cash hoard of RM89.2 million and no debt. Compared to a company that is laden with debt, Riverstone should be in a better position to tackle an economic crisis.

Net cash flows generated from operations more than doubled from RM11.8 million to RM25.2 million in the latest quarter. However, free cash flow was at a negative RM2.3 million due to Riverstone spending RM27.4 million in the quarter to acquire property, plant and equipment. Investors should keep an eye out on whether the company’s free cash flow would be able to pick up in future quarters once the expansion plans (mentioned below) which are set out by the company are already fulfilled.

Here’s Wong again with comments on Riverstone’s expansion:

“The first phase of our expansion plans is on track as we have commenced trial production and expect to be at full production capacity by 4QFY2014. This will add 1.0 billion gloves to our total annual production capacity of 4.2 billion gloves by 31 December 2014. In our push for sustainable growth and expansion, we remain vigilant about industry competition and continue to monitor closely the movement in commodity prices and fluctuations in the US currency.”

Riverstone declared an interim dividend of 2.35 sen per share, a rise of 2.2% from the dividend of 2.3 sen per share declared in the previous year.

Shares of the glove manufacturer are currently trading at S$0.935, giving it a trailing price/earnings (PE) ratio of around 14.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.