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

First Resources Ltd (SGX: EB5) reported its 2016 third quarter earnings yesterday. The reporting period was for 1 July 2016 to 30 September 2016.

As a quick background, First Resources is a producer of palm oil. The company organises its business into three major segments: Crude Palm Oil; Palm Kernel; and Refinery and Processing.

You can catch the results from the company’s previous quarter here.

Financial highlights

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

  1. Revenue was up around 41% year-on-year, coming in around US$152 million. But do note that the numbers from the comparable quarter a year ago were restated.
  2. Net profit for the period was US$38.3 million, up around 29% year-on-year.
  3. Consequently, earnings per share (EPS) was US$0.0226 in the reporting quarter, up 26% from the US$0.0179 seen in the same quarter a year ago.
  4. Cash flow from operations came in at US$97.7 million for 2016’s third-quarter with capital expenditure clocking in at US$25.4 million. This led to free cash flow of US$72.1 million for the reporting quarter.
  5. As of 30 September 2016, First Resources has US$217.6 million in cash and bank balances (Note: of that sum, US$128.1 million is earmarked as restricted) and US$484.5 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 at the end of last year.

In all, First Resources saw its revenue and profit increase for the reporting quarter. The oil palm producer also produced positive free cash flow and had improved its balance sheet compared to end-2015.

Operational highlights and the outlook ahead

First Resources had higher production volumes and higher average selling prices for its products, which led to higher revenue.

The refinery and processing segment sold over 186,000 tonnes of product in the third quarter, up substantially from the 137,196 tonnes sold in the same quarter last year. Elsewhere, plantation and palm oil mill sales volume was roughly flat at 205,139 tonnes.

First Resources added the following outlook in its earnings release:

“While palm oil prices continue to be influenced by prices of competing oils and the low crude oil price, the Group expects the Indonesian biodiesel mandate and the current low palm oil inventories to provide support to prices.

On the production front, the Group saw less pronounced declines in production volumes in 3Q2016 as compared to 1H2016 as the El Nino impact gradually tapers off. While the Group’s young plantation maturity profile continues to support production output, overall volume for 2016 is still expected to be lower than 2015 due to the adverse impact of El Nino in 2015.”

At its opening price today of S$1.81, First Resources traded at 15.5 times trailing earnings and has a trailing dividend yield of 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.