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Riverstone Holdings Limited’s Latest Earnings: Revenue Grows, But Profits Are Held Back

Credit: Rvierstone Holdings Limited

Riverstone Holdings Limited (SGX: AP4) reported its fiscal first-quarter earnings yesterday evening. The reporting period was for 1 January 2016 to 31 March 2016.

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

Financial highlights

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

  1. Revenue for the reporting quarter was RM148 million, up 16.5% compared to the same quarter a year before.
  2. But, profit attributable to shareholders inched up by just 0.6%, ending the quarter at RM27.2 million. Consequently, earnings per share (EPS) was 3.82 sen, a slight improvement from a year ago.
  3. Cash flow from operations for the first-quarter came in at RM13.3 million with capital expenditure clocking in around RM11.1 million. This puts the glove maker in positive free cash flow territory to the tune of RM2.2 million. It’s a big step down from the first-quarter of 2015 though. Back then, Riverstone had RM14 million in free cash flow (RM26.2 million in cash flow from operations and RM12.2 million in capex).
  4. As of 31 March 2015, Riverstone had cash and equivalents of RM123.8 million and no debt. This is an improvement from the RM96.8 million in cash and equivalents and no debt that was recorded a year ago.

In all, Riverstone’s top-line growth had “slowed down” to 16.5% in the reporting quarter after revenue expanded by 37% in the fourth-quarter of 2015. The glove-maker’s profit in the reporting quarter was hampered by foreign exchange losses and higher raw material prices. Nevertheless, Riverstone remained free cash flow positive and ended the quarter with a strong balance sheet.

Operational highlights

Wong Teek Son, Riverstone’s executive chairman and chief executive, had the following commentary to share on the company’s business highlights for the reporting quarter:

“As we progress on the third phase of our expansion adding one billion in annual total production capacity to 6.2 billion gloves by end of FY2016, we are encouraged by the growth in traction among new and existing customers. In particular, our focus in expanding our presence in the North American market has gained momentum despite intensifying industry competition.

Industry headwinds such as fluctuations in foreign exchange and raw material prices however remain key challenges for us and we have stepped up vigilance accordingly. Notwithstanding our efforts to improve operational efficiencies such as increased automation in our production lines, our gross profit margin moderated marginally to 29.1%, in line with our expectations.”

The company is continuing to roll out its Phase 3 expansion plan in Taiping, Perak. Riverstone expects to have a total annual capacity of 6.2 billion gloves by the end of this year. Meanwhile, Wong also added his thoughts around his outlook for the company’s future:

“Amidst market uncertainty and volatility, we remain supported by a strong balance sheet with cash and cash equivalents of RM123.8 million. Despite the ongoing industry challenges, we remain cautiously optimistic with our ongoing expansion plans as global demand for gloves is estimated at 190.0 billion pieces for 2016 and has a growth rate of 6 – 8% going forward.”

Riverstone also cited commodity prices, the US currency fluctuation and competition from other glove makers as ongoing challenges that it has to manage.

At its closing price yesterday of S$0.95, Riverstone had a trailing price-to-earnings (PE) ratio of 16.2 and a dividend yield of 2.3%.

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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.