Sarine Technologies Ltd’s Latest Earnings: Strong Rebound in Sales and Profit

Sarine Technologies Ltd (SGX: U77) reported its second-quarter earnings yesterday. The reporting period was for 1 April 2016 to 30 June 2016.

As a brief background, Sarine Technologies sees itself as a worldwide leader in the development of precision technology products for the planning, processing, evaluation and measurement of diamonds and other gems. You can read more about the company in here and catch up with the results from its previous quarter here.

Financial highlights

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

  1. For the second-quarter of 2016, Sarine Technologies’ revenue was US$20.9 million, up almost 45% year-on-year.
  2. Net profit soared by 125% year-on-year, ending at US$6 million for the second-quarter. Higher sales coupled with slower growth in expenses helped lift the diamond manufacturing systems provider’s profits.
  3. Consequently, earnings per share (EPS) was S$0.0233 for the second-quarter, more than double from the S$0.0103 recorded a year ago.
  4. For 2016’s second quarter, cash flow from operations came in at US$8.45 million with capital expenditure clocking in at US$1.31 million. This gives Sarine Technologies positive free cash flow of over US$7.14 million. In last year’s second-quarter, Sarine Technologies recorded free cash flow of less than US$1 million (US$1.91 million in cash flow from operations and US$1.11 million in capex).
  5. As of 30 June 2016, the company had US$37.4 million in cash and equivalents and no debt. A year ago, Sarine also had US$37.4 million in cash and equivalents and zero debt.

Sarine Technologies experienced another upturn in fortunes in the reporting quarter. Revenue and profit both rebounded strongly for the second-quarter of 2016, after recording a strong recovery in the first-quarter this year. The company also recorded a big increase in free cash flow and maintained the strength of its balance sheet.

The strong performance likely prompted the board of directors to issue an interim dividend of US$0.02 per share, a 33% improvement from last year.

Operational highlights and the road ahead

During the second-quarter of 2016, Sarine Technologies had benefited from higher sales of diamond manufacturing equipment and growing recurring revenue. The company delivered 20 Galaxy family systems for the quarter. To put this into perspective, it delivered only 25 Galaxy family systems for the whole of 2015.

The total installed base for Sarine Technologies’ Galaxy family of systems stood at 253 as of 30 June 2016. Recurring revenue accounted for around 40% of total revenue in the first-half of 2016.

On a geographical basis, revenue from India drove most of the improvements in the second-quarter of 2016, as it grew by over 58% year-on-year. Investors should note that India is a particularly important market for Sarine Technologies. For the reporting quarter, sales from India made up over 80% of the company’s revenue.

Uzi Levami, Sarine Technologies’ chief executive, commented on its outlook for the year in the earnings release:

“Though we expect slightly fewer deliveries in the second half of 2016, primarily due to the Indian Diwali holiday in Q4 2016, we are confident that 2016 will be a record year for GalaxyTM family system deliveries, expanding substantially upon the typical 40+ deliveries realised in the previous years.”

Sarine Technologies also said that its new Sarine Profile product – an imaging technology product which displays details on the aesthetics of polished diamonds – is “creating buzz” among leading jewellery retailers in the US and Asia Pacific region.

Sarine Technologies’ shares closed the trading session today at a price of S$1.79. This gives the company a trailing price-to-earnings ratio of 51 and a trailing dividend yield of 2.6%.

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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.