The Good And The Bad: What Investors Should Know About Riverstone Holdings Limited’s Latest Earnings

Riverstone Holdings Limited (SGX: AP4) is a Malaysia-based company producing rubber gloves for both the cleanroom as well as medical industries.

In early August, Riverstone released its 2017 second quarter results. There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:

1. The overall result

The table below shows the important numbers from Riverstone for the second quarters of 2017 and 2016:

Source: Riverstone 2017 second quarter earnings announcement

In the reporting quarter, Riverstone’s revenue grew at a strong clip of 36.1% due to an increase in demand for the company’s premium healthcare and cleanroom gloves.

But, higher costs resulted in the net profit being unchanged as compared to the same quarter in the previous year.

2. The positives

Firstly, Riverstone’s revenue was up due to strong demand for its premium healthcare and cleanroom gloves, as mentioned earlier. As a result, the company is currently operating at close to full capacity.

Secondly, the company’s expansion plan has become even bigger. The original plan was to reach an annual production capacity of 7.2 billion gloves by the end of 2017. The latest plan is to reach 7.6 billion pieces of gloves by this year’s end.

Based on Riverstone’s existing expansion plans, its production capacity is expected to hit 10.4 billion gloves by end-2019. So, it’s possible that Riverstone can continue to grow, going forward.

Thirdly, the company managed to keep its selling, distribution, and administration costs flat despite the sharp increase in revenue.

3. The negatives

Firstly, the increase in the cost of production – raw materials, labour, and more – continue to pose a significant challenge to Riverstone. In fact, higher raw material costs resulted in the company’s gross margin declining from 24.4% a year ago to 20.5%.

Secondly, the favourable currency tailwind of the past few years was absent in the reporting quarter. The company was negatively impacted by currency movements, as a foreign exchange-related gain of RM 3.0 million in the second quarter of 2016 became a loss of RM 2.4 million in the reporting quarter.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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. The Motley Fool Singapore has recommended Riverstone.