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

First Resources Ltd (SGX: EB5) reported its fiscal first-quarter earnings this morning. The reporting period was for 1 January 2016 to 31 March 2016.

First Resources is a producer of palm oil and organises its business into three segments: Crude Palm Oil; Palm Kernel; and Refinery and Processing.

You can read more about the company in here.

Financial highlights

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

  1. Quarterly revenue for First Resource was up 17.5% on a year-on-year comparison, coming in at US$113 million.
  2. But, net profit for the period fell hard, closing nearly 78% lower at US$5.3 million.
  3. First Resources’ earnings per share (EPS) thus fell to US$0.0034 in the reporting quarter, down from the US$0.0153 seen in the same quarter a year ago.
  4. Cash flow from operations came in at US$29.4 million for the first-quarter of 2016 with capital expenditures clocking in at US$16.4 million. As such, First Resources generated US$13 million in free cash flow for the reporting quarter, largely unchanged from a year ago (US$42.2 million in cash flow from operations and US$30.6 million in capex).
  5. As of 31 March 2016, First Resources had US$190.4 million in cash and bank balances (note: a sum of US$108.5 million is earmarked as restricted) and US$513 million in debt. This is a slight decrease from the US$205.4 million in cash and bank balances and US$495 million in debt recorded in the previous quarter.

In all, First Resources saw its revenue increase, but its profit fell significantly. On a brighter note, the oil palm producing outfit had positive free cash flow for the quarter. The firm’s balance sheet had also remained relatively unchanged compared to the previous quarter.

Operational highlights

First Resources had higher sales volumes but suffered from lower average selling prices. This impacted the results as we had seen above.

First Resources’s refinery and processing segment processed over 195,000 tonnes in the first quarter, up substantially from the 42,000 tonnes done in the same quarter last year. Elsewhere, plantation and palm oil mill sales volume fell 20% year-on-year to around 86,000 tonnes.

The management team had shared the following comments in the earnings release on their outlook for First Resources’ future:

The recovery in palm oil prices has been largely driven by concerns over the impact from prolonged dry weather last year, which is suppressing industry-wide production. The recent higher prices is expected to improve our financial performance as compared to 1Q2016.

While palm oil prices continue to be influenced by prices of other competing oils and the low crude oil price, the Group expects the Indonesian biodiesel mandate and demand from the emerging economies to support palm oil prices.

On the production front, the Group expects its production to continue to be impacted by the lagged effects of the dry weather in 2015, such that overall production in 2016 is expected to be lower than the preceding year. The Group will continue to focus on strengthening its operational efficiencies and keeping costs low.”

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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.