First Resources Ltd’s Latest Earnings: A Rocky Start to the Year

First Resources Ltd (SGX: EB5) reported its fiscal first-quarter earnings earlier this morning. The reporting period was for 1 January 2015 to 31 March 2015.

In essence, First Resources is a producer of palm oil and its business is organized into three major segments: Crude Palm Oil; Palm Kernel; and Refinery and Processing.

You can read more about the company here.

Financial highlights

Here’s a rundown on First Resources’ latest set of financial figures:

  1. Quarterly revenue for First Resources was down a whopping 46% to US$92.3 million when pitted against the same quarter a year ago.
  2. Consequently, net profit for the quarter fell hard, ending 39% lower year on year at around US$28.8 million.
  3. Earnings per share (EPS) followed suit with a 38% fall from 2.84 US cents in the first quarter last year to 1.75 US cents in the reporting quarter.
  4. Cashflow from operations came in at US$42.1 million for the first quarter of 2015 with capital expenditures clocking in at US$30.6 million. As such, First Resources generated US$11.5 million in free cash flow for the reporting quarter. This is a bright spot for the quarter, but still miles away from the US$48.6 million in free cash flow that was generated in the same quarter a year ago.
  5. As of 31 March 2015, the company had US$356.6 million in cash and equivalents and US$540.3 million in debt, thus giving rise to a net-debt position of US$183.7 million. This is nearly unchanged from the net-debt position of US$181.3 million that First Resources had a year ago.

In all, it was a challenging quarter for First Resources to say the least. On a brighter note, the oil palm producing outfit had managed to generate positive cash flow during the quarter.

Operational highlights and a future outlook

Sales at First Resources suffered from a combination of lower sales volume and lower average selling prices.

Sales volumes at its Refinery and Processing segment was the most affected, falling significantly by 67% from 128,370 tonnes a year ago to 41,848 tonnes in the reporting quarter. The company had attributed the decline partly to a slowdown in the processing activities at its refinery, fractionation, and biodiesel plants “in view of unfavourable refining margins.”

Elsewhere, sales volumes in the Crude Palm Oil and Palm Kernel segments fell due to lower purchases of palm oil products and a net build-up in inventory.

First Resources’ management team had shared the following comments in its earnings release on the company’s outlook for the future:

“Weakness in crude oil and soybean oil prices, coupled with the slowing demand in China, continued to exert pressure on palm oil prices. Prices are expected to remain weak in the near term as the industry enters into the seasonally higher production period. However, the long-term fundamentals of the palm oil industry remains favourable with the higher biodiesel blending mandate in Indonesia and underlying demand growth from emerging markets.

On the production front, the Group expects production growth of fresh fruit bunches to continue in 2015 due to yield recovery as well as contribution from our newly mature plantations. ”

Foolish summary

At its opening price today of $1.81, First Resources traded at around 18.4 times its trailing earnings with a dividend yield of around 2% (thanks to its annual dividend of S$0.0355 cents in 2014).

Foolish investors should note that First Resources’ dividend had fallen from $0.045 cents per share in 2013 to $0.0355 cents in 2014 as mentioned earlier. As such, we should not assume that the company’s 2% yield now would be a “sure thing” with future distributions.

If you'd like to keep updated on the latest company and stock market news, sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore

Also, like us on Facebook to follow our latest hot articles.

The Motley Fool's purpose is to help the world invest, better.

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.