Riverstone Holdings Limited’s Latest Earnings: Profits Soar 78% in a Banner Year

Credit: Rvierstone Holdings Limited

Riverstone Holdings Limited (SGX: AP4) reported its fiscal fourth-quarter earnings yesterday evening. The reporting period was for 1 October 2015 to 31 December 2015.

The company is primarily a manufacturer of disposable nitrile gloves for clean rooms and the healthcare industry. You can read more about Riverstone in here and here.

Financial highlights

The following’s a quick rundown on the latest important financial figures for Riverstone:

  1. Revenue for the reporting quarter was RM153 million, up a stupendous 37% compared to the same quarter a year before. For the full year, Riverstone’s revenue soared by 40% to end at RM560.2 million.
  2. Profit attributable to shareholders was up even more, leaping 66% year-on-year to RM37.2 million for the reporting quarter. For 2015, profit was up a tremendous 78.4% to RM126.5 million.
  3. For 2015, earnings per share (EPS) was 34.09 sen (RM), a 78.4% jump from the EPS of 19.11 sen it made in 2014. The EPS is on a pre-split basis (Riverstone had proposed a bonus 1-for-1 share issue on November 2015; the bonus shares were issued only on 1 February 2016).
  4. Cash flow from operations for the fourth-quarter came in at RM13.8 million with capital expenditure clocking in around RM9.6 million. This puts the glove maker in positive free cash flow territory to the tune of RM4.2 million. For the full year, Riverstone generated RM68.4 million in free cash flow (RM122.1 million in cash flow from operations and RM53.7 million in capex). For perspective, Riverstone ended 2014 with negative free cash flow as it had RM62.8 million in cash flow from operations but RM73.7 million in capex.
  5. As of 31 December 2015, Riverstone’s cash and equivalents had swelled to RM128.7 million from RM79.4 million a year ago. The company had no debt on both occasions.

In summary, Riverstone’s top-line and bottom-line grew significantly in the banner year. In addition, free cash flow had improved alongside profits and the firm’s balance sheet remained strong and debt free.

The board of directors had proposed a final dividend of 5.25 sen per share for the reporting quarter. This dividend will also be paid for the aforementioned bonus shares that were issued on February 2016. If this dividend were adjusted for the bonus issue to make for an apples-to-apples comparison for the final dividend seen in 2014 (4.55 sen), the number would be 10.5 sen instead.

On a pre-split basis, Riverstone’s total dividend for 2015 is 12.9 sen. In 2014, it was 6.9 sen.

Operational highlights

Riverstone’s revenue improved due to higher glove demand. In its earnings release statement, the company also cited higher levels of automation and a strengthening US dollar against the Malaysian ringgit as factors which led to improved profitability.

The company’s Phase II of its expansion plan in Taiping, Perak, Malaysia, has been completed and the firm’s current annual production capacity stands at 5.2 billion gloves (up from 4.2 billion gloves in 2014).  Construction for Phase III, which will bring Riverstone’s production capacity to 6.2 billion gloves, has also begun.

Wong Teek Son, Riverstone’s founder, executive chairman, and chief executive, had some comments to share in the earnings release regarding his company’s performance:

“This year we completed our second chapter of expansion which increased our annual production capacity to 5.2 billion pieces of gloves. Amidst the competitive industry landscape, we continue to differentiate from peers with our two-pronged approach in growing both cleanroom and healthcare glove businesses.

Apart from working closely with customers to provide new solutions which address their needs, we are also focused on improving operational efficiencies. For instance, the increased introduction of automation in our production processes has reflected an improvement in gross profit margin to 31.2% from 27.3% in FY2014.

Our balance sheet remains resilient with a cash and cash equivalent balance of RM128.7 million as it is underpinned by the Group’s ability to consistently generate strong positive operating cash flows. As such, the Board is pleased to recommend a final dividend of 5.25 sen (RM) per share, which brings the full year dividends to a record 6.45 sen (RM) as we continue to reward shareholders for their support in us.”

Wong also added his thoughts around the outlook for his company’s future:

“The construction of Phase 3 has already begun and this will further grow our annual production capacity to 6.2 billion pieces by the end of FY2016. Apart from consistent organic growth driven by increasing demand over the past few years, we have also benefitted from favourable currency and raw material prices. Apart from these macroeconomic conditions, we maintain vigilance over operational challenges such as rising labour and fuel costs as we continue to tap on new and existing markets for growth.”

Riverstone is pushing ahead with growing its production. Now let’s see if the demand is there.

Foolish take away

At its closing price yesterday of S$0.98, Riverstone traded at around 17.3 times trailing 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 Chin Hui Leong doesn’t own shares in any companies mentioned.