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2 Companies That Recently Reported Lower Profits In Their Latest Quarterly Earnings

We’ve come to the end of the earnings season. As is common with every earnings season, there will be some companies posting growth, some companies posting mixed numbers, and some companies experiencing declines.

So, which are the companies that recently delivered lower profits? Let’s take a look at two of them:

1. In early August, Sarine Technologies Ltd (SGX: U77) reported its 2017 second quarter earnings.

As a quick introduction, the Israel-based Sarine Technologies develops technological produces that are used for the processing of rough diamonds and gemstones into the polished stones you see in jewellery shops.

In the reporting quarter, revenue was down by 13.0% year-on-year to US$18.2 million while net profit plunged by 46.5% to US$3.23 million. Lower equipment sales in India as well as higher operating expenses, in part due to the weaker US dollar, were the main culprits for the weaker profitability. Furthermore, the company’s revenue was impacted by patent and copyright infringement activities of an illegal competitor in India.

On a slightly positive note, Sarine Technologies ended the reporting quarter with US$37.1 million in cash and equivalents and zero debt.

In its earnings release, Sarine Technologies commented that consumer demand is robust in all significant retail diamond markets, except for India.

2. QAF Limited (SGX: Q01) is another company that released its 2017 second quarter results in early August. Although QAF’s revenue in the reporting quarter was up by 1% year-on-year to S$209.8 million, its profit attributable to shareholders actually fell by a sharp 72% to S$8.1 million.

Part of the big profit decline was due to the presence of an exceptional gain of S$9.7 million in the second quarter of 2016 that came due to the sale of shares in a subsidiary. But even if the one-off gain was excluded, QAF’s 2017 second quarter earnings would still be down by 58% year-on-year.

As a quick introduction, QAF is a food production company. Its business activities include bakery operations, pork production, food processing and distribution, feed milling, food trading and distribution, food manufacturing, wine distribution, and the ownership and leasing of warehouses.

Higher operating expenses in the Bakery and Primary Production segments had impacted QAF’s bottom-line. In particular, the Primary Production segment was affected by an oversupply in the market which resulted in a 20% fall in pork prices in the first half of 2017.

Here’s what QAF commented about its future in its latest earnings release:

 “The Group’s performance is expected to be affected by a number of factors, including competition, currency volatility and increasing costs arising from higher raw material prices, higher energy costs and higher distribution cost in certain markets.

In the bakery business, the Group is facing heightened competition and higher raw material prices. Advertising and Promotion expense and Distribution and Transportation expense are expected to increase further, particularly in the Philippines and Singapore.”

In its earnings release, QAF also gave updates on the strategic review of its Primary Production business. The company said that it has decided to pursue a listing of the business in the Australian stock market. There have so far been no updates on this front from QAF.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.