Sarine Technologies Ltd’s Latest Earnings: What Investors Need to Know

Sarine Technologies Ltd (SGX: U77) manufactures precision technology products for the processing and trade of diamonds and gemstones. Over the weekend, the firm announced its second-quarter earnings (Q2 2017). The financial period was from 1 April 2017 to 30 June 2017.

Here’s a quick rundown on the financial figures from the latest quarter:

1. Revenue came in at US$18.2 million, declining 13% as compared to Q2 2016.

2. Net profit tumbled 46.5% year-on-year to US$3.2 million.

3. Consequently, earnings per share for the quarter was at 0.92 US cents, down from 1.73 cents seen in Q2 2016.

4. The firm had a strong balance sheet. As at 30 June 2017, Sarine had US$21.8 million in cash with no borrowings. This is an improvement from US$19.5 million in cash (with zero debt) it had on 31 December 2016.

5. Cash flow from operations was at US$5.5 million, and S$951,000 was spent on capital expenditure. Therefore, the firm brought in around US$4.6 million in free cash flow for the latest quarter, a decline from US$7.1 million brought in a year ago.

Sarine said the poor showing for the quarter was due to “lower equipment sales in India as well as higher operating expenses, in part due to the weaker U.S. Dollar”.

It also added that its sales of inclusion mapping systems for smaller stones were affected by “patent and copyright infringement activities of an illegal competitor in India”. Sarine has been taking aggressive legal and other actions against that competitor.

Revenue for the first half of 2017 came in at US34.4 million, down 5.3% year-on-year, but 41% of the revenue was recurring in nature. Meanwhile, net profit declined 36.9% to US$5.7 million.

Shareholders will receive an interim dividend of 2.0 US cents per share, unchanged from a year ago.

Looking ahead, the firm said:

“Although the illicit competition is likely to prevail into Q3 2017, Sarine remains confident of maintaining its solid market leadership position, as evident by the record number of stones processed by its growing base of inclusion mapping systems. The Group also expects growth in the number of stones scanned for Sarine ProfileTM to accelerate in the second half of 2017”.

It also added:

“In Q3 2017, the Group will begin to commercialise its new technologies for Clarity and Colour grading of polished diamonds, with the formal launch scheduled for mid-September”

Shares of Sarine closed at S$1.50 on Friday. This translates to a price-to-earnings ratio of around 24 and a dividend yield of close to 4%.

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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 Sudhan P doesn’t own shares in any companies mentioned.