First Resources Ltd’s Latest Earnings: A Soaring Start to 2017

Yesterday, palm oil producer First Resources Ltd (SGX: EB5) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

You can catch the results from First Resources’ previous quarter here.

Financial highlights

The following’s a rundown on some of First Resources’ financial figures for 2017’s first quarter:

1. Revenue was up 71.6% year-on-year to US$194 million.

2. Net profit for the period soared 807% to US$48.5 million.

3. Earnings per share (EPS) was US$0.0306, up 900% from a year ago.

4. Cash flow from operations was US$65.9 million and capital expenditure was US$21 million. First Resources generated almost US$45 million in free cash flow, up significantly from a year ago when free cash flow was US$13.0 million (US$29.4 million in cash flow from operations and US$16.4 million in capex).

5. As of 31 March 2017, First Resources had US$302.8 million in cash and bank balances (note: a sum of US$143.9 million is earmarked as restricted) and US$454 million in debt. This is an improvement from the US$190.4 million in cash and bank balances and US$513 million in debt recorded a year ago.

First Resources delivered a bumper crop of results, recording a huge increase in revenue and profit. The palm oil producer also recorded healthy free cash flow and strengthened its balance sheet.

Operational highlights and what lies ahead

First Resources benefited from higher sales volumes and higher average selling prices. Growth was across the board. Its plantations and palm oil mills revenue was up 56% year-on-year to US$134.5 million. Refinery and Processing sales was up 76.6% to US$181.8 million.

In First Resources’ earnings release, management team shared the following outlook:

“The Group’s strong performance in the first quarter of 2017 has been aided by higher palm oil prices in early 2017 and strong production growth. However, prices have moderated since on improving supply prospects for palm oil and other edible oils as well as muted demand from importing countries such as India and China. Lower prices are expected to persist as both our own as well as the industry’s production continue to recover especially in the second half of 2017.

The Group’s production growth has been strong since the fourth quarter 2016, and barring any weather shocks, this yield recovery is expected to continue for the rest of the year. However, after the strong production in the first quarter of 2017, production in second quarter is expected to slow down before recovering in the second half of 2017.

Amidst the short term volatility in palm oil prices, the longer term fundamentals of the industry remain positive, underpinned by the Indonesian biodiesel mandate and underlying demand growth from emerging markets.”

At its closing share price of S$1.96 today, First Resources traded at 13 times earnings and had a dividend yield of 1.5%.

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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.