Riverstone Holdings Limited’s Latest Earnings: Solid Growth Seen

Riverstone Holdings Limited (SGX: AP4) released its second-quarter earnings for its fiscal year ending 31 December 2015 yesterday evening.

The company manufactures nitrile and natural rubber clean room gloves that are used in highly controlled and critical environments. In addition, it also makes premium nitrile gloves that are used in the healthcare industry.

With that, let’s dig into Riverstone’s latest quarterly earnings.

The financial highlights

Revenue for the second-quarter surged by 33.2% year-on-year, from RM96.9 million to RM129 million. Riverstone’s strong top-line growth came on the back of increased demand for both its cleanroom and healthcare gloves.

Moving down the income statement, gross profit jumped by around 50% to RM38.8 million as a result of tighter cost control.

Despite increases in selling and distribution expenses and payroll costs, Riverstone still managed to clock in a net profit growth of 68.1% year-on-year to RM27 million for the reporting quarter. The net profit a year ago was at RM16.1 million.

Let’s now turn our attention to the balance sheet. As of 30 June 2015, Riverstone had a strong balance sheet with RM95.9 million in cash reserves (including fixed deposits) and no debt. This is also nice improvement from the cash reserves of “only” RM79.4 million that was seen at the end of 2014.

Cash is the lifeblood of any company. Even if a company has lots of profits but no cash inflow to show for it, it’d likely still have to borrow heavily in order to fund its daily operations. Fortunately, this is not the case with Riverstone.

For the reporting quarter, Riverstone saw its net cash flows from operations increase by 9.1% year-on-year to RM27.4 million. Meanwhile, free cash flow came in at RM 16.1 million in the second quarter of 2015, up from a negative figure of RM2.28 million a year ago.

Riverstone had declared an interim dividend of 2.40 sen per share for the reporting quarter, up from the interim dividend of 2.35 sen for the same period a year ago.

A future outlook

Looking ahead, the second phase of the firm’s expansion in Taiping, Perak, Malaysia, will be completed ahead of time. Once it is done in the third-quarter of 2015 instead of the previously estimated fourth-quarter, Riverstone can add another billion pieces of gloves to its annual glove production capacity of 4.2 billion currently.

While it’s great to see Riverstone expanding its operations, there are some potential risks to note as well with the firm cautioning in its earnings release that “movement in commodity prices, the US currency fluctuation and competition from the other glove manufacturers remain as challenges”.

Riverstone ended Tuesday at S$1.75 and is going at 19 times its historical earnings.

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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.