First Resources Ltd’s Latest Earnings: What Investors Should Know

First Resources Ltd (SGX: EB5) reported its second-quarter earnings last Friday. The reporting period was for 1 April 2016 to 30 June 2016.

As a quick background, First Resources is a producer of palm oil with three business segments, namely, Crude Palm Oil, Palm Kernel, and Refinery and Processing.

You can read more about the company in here or catch up with the results from the previous quarter here.

Financial highlights

The following’s a rundown on some of the latest financial figures for First Resources:

  1. Revenue was up 14% year-on-year, coming in at US$135.4 million.
  2. Net profit for the period was US$27.1 million, up by 6% from a year ago.
  3. Earnings per share (EPS) came in at US$0.0165 in the reporting quarter, up 4.4% from the US$0.0158 seen a year ago.
  4. Cash flow from operations was a negative US$1.4 million for 2016’s second-quarter with capital expenditure clocking in at US$17.4 million. First Resources thus logged negative free cash flow of US$18.8 million for the reporting quarter, an improvement from the negative US$33.8 million (cash flow from operations of US$1.95 million and capex of US$31.8 million).
  5. As of 30 June 2016, First Resources had US$180.9 million in cash and bank balances (note: a sum of US$117.8 million was earmarked as restricted cash) and US$527 million in debt. This is a decrease from the US$291.1 million in cash and bank balances (restricted cash was US$91.8 million) and US$530.5 million in debt recorded at the end of last year.

In all, First Resources saw its revenue and profit increase for the reporting quarter. Unfortunately, the oil palm producer generated negative free cash flow and saw its balance sheet weaken.

First Resources declared an interim dividend of 0.625 Singapore cents per share, down from the 1.25 Singapore cents per share paid out last year.

Operational highlights and the road ahead

First Resources had a reversal in fortunes compared to the first-quarter of 2016.

The oil palm producer had lower sales volumes in the reporting quarter compared to a year ago, but was lifted by higher average selling prices; during the first-quarter of 2016, First Resources had higher sales volume, but suffered from lower average selling prices.

The refinery and processing segment processed 179,676 tonnes in the second-quarter of 2016, up substantially from the 123,681 tonnes processed in the same quarter last year. Elsewhere, plantation and palm oil mills’ sales volume fell by over 20% year-on-year.

First Resources’ chief executive Ciliandra Fangiono added the following comments in the earnings release on the company’s future outlook:

“The higher palm oil prices in 2Q2016 contributed to the improvement in our financial performance. Prices have subsequently moderated but remain supported by the restocking of palm oil by importing countries in recent weeks. In the longer-term, the Indonesian biodiesel mandate and underlying demand growth from emerging markets continue to underpin the positive outlook of the palm oil industry.”

First Resources’ shares closed at a price of S$1.63 each last Friday. At that price, the company is valued at 21 times trailing earnings and has a trailing 12 months dividend yield of 1.1%.

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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.