6 Interesting Things You Must Know About This Market Beating Company – Part 2

I managed to attend an investor relations event for Riverstone Holdings Limited (SGX: AP4) recently and was able to gain new insight on this market-beating company.

For readers who are unfamiliar, Riverstone is primarily a manufacturer of disposable nitrile gloves for the clean room and healthcare industry.

Since the start of 2010, the glove-making outfit’s shares have gained 125%, far outpacing the SPDR STI ETF‘s (SGX: ES3) 13% return over the same timeframe. The SPDR STI ETF is a proxy for Singapore’s market barometer, the Straits Times Index (SGX: ^STI).

Here’re six interesting things I learned about Riverstone at the event:

1. The first three

The first three snippets relate to where Riverstone stands in its industry, how its products are differentiated, and where its growth may come from. Click here for more.

4. How future growth will be supported

Riverstone is currently in Phase Two of its plant expansion in Taiping, Malaysia. Capital expenditures are expected to be around RM50 million for 2015, as the firm brings its total production capacity from 4.2 billion gloves currently to 5.2 billion by the end of this year.

The current capacity of 4.2 billion gloves will support 2015’s growth requirements.

Ultimately, there are five expansion phases in all. Each phase will add approximately 1 billion in additional capacity. Notably, Riverstone’s management team will incrementally assess market conditions before proceeding with each phase of expansion.

What’s also interesting is that the company was able to keep a 90% factory utilization rate for 2014 while keeping the facilities flexible and interchangeable to produce both cleanroom and healthcare gloves.

5. Retaining staff

As Foolish investors, we love seeing a company possess a strong culture and high rate of staff retention. According to Riverstone’s investor relations firm, the glove maker has managed to retain all its key staff (chemists) since its inception while keeping overall attrition rate at around 5%.

6. Challenges in the industry

As a player in a largely commoditized industry, Riverstone is not immune to some of the challenges in the industry. Challenges include raw material prices (butadiene) which may have affected its level of profitability in 2011.

Additionally, both the clean room and healthcare industry may experience pricing competition and this can limit Riverstone’s ability to pass on price increases to its customers in a timely fashion.

Bringing it together

Riverstone appears to be a careful operator in a commoditized glove industry. It actively seeks niches within the industry like the Scandinavian market for healthcare gloves and/or designs its production recipes around the customized requirements of its customers.

The ability to find new niches may be the key to the company’s future growth.

Riverstone may not be able to avoid all industry-related headwinds, therefore the strength of its positive free cash flow and balance sheet could play an important part in keeping the company viable for future opportunities.

That would do it this time around. I hope you’re able to glean new insights about Riverstone from what I’ve shared.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.