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Here Are 2 Stocks That Delivered Lower Profits Recently

The earnings season has more or less come to an end. As is common with every earnings season, there will be some companies posting growth, some posting mixed numbers, and some experiencing declines.

So, which are the businesses that have recently reported lower profits? Let’s look at two of them:

1. Two weeks ago, First Resources Ltd (SGX: EB5) reported its 2017 third quarter earnings. As a quick introduction, First Resources is an integrated palm oil producer with close to 209,000 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia.

During the reporting quarter, revenue was down by 9.3% year-on-year to US$137.4 million. This dragged net profit attributable to shareholders down by 11.3% to US$31.9 million.  First Resources’ poor showing can be attributed to lower average selling prices for its products, and an inventory build up.

But on a bright note, the company’s sales volumes for crude palm oil and palm kernel both increased due to higher fresh fruit bunches production.

In First Resources’ earnings release, it also provided the following outlook:

“The Group’s financial performance in 9M2017 has been aided by production growth from its recovery from El Nino effects, albeit production grew at a slower pace in 3Q2017 as compared to the earlier quarters. Looking forward, we expect nucleus FFB [fresh fruit bunches] production growth in 4Q2017 over 4Q2016 to be even slower.

The industry’s weaker-than-expected output growth, restocking by importing countries and palm oil’s attractive relative pricing against other edible oils are expected to remain supportive of prices in the near term.”

2. Straco Corporation Ltd (SGX: S85) reported its 2017 third quarter earnings two weeks ago as well.

The tourism asset operator experienced a 3.2% decline in revenue to S$46.1 million, compared to 2016’s third quarter. Profit attributable to shareholders dropped by a similar magnitude of 6.1% to S$21.3 million.

Straco is a tourism asset operator with operations in China and Singapore. In China, the company has the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions under its umbrella. As for Singapore, Straco is the majority owner of the iconic Singapore Flyer, one of the largest observation wheels in the world.

The company’s lower revenue in the reporting quarter was due to lower visitors to Underwater World Xiamen. The aquarium is located in Guluangyu island, which was recently designated as a UNESCO World Heritage site. The designation caused local authorities to restrict visitor numbers, and this affected Underwater World Xiamen. Moreover, there was tight traffic control in Xiamen city in view of the 2017 BRICS Summit held in September.

The rest of Straco’s key attractions – Shanghai Ocean Aquarium and the Singapore Flyer – delivered higher revenue.

In its earnings release, Straco shared some comments on the state of its markets. It said:

“On the tourism sector, the China National Tourism Administration reported that a total of 705 million tourists travelled around the country during the National Day golden week, generating 583.6 billion Yuan of revenue, representing 11.9% and 13.9% increase year-on-year respectively.

According to the State Council five-year tourism plan (2016-2020), the sector will contribute more than 12% of GDP growth, as the nation works towards developing tourism into a major driver of economic transformation.

…On the tourism sector, it was reported that the Singapore Tourism Board (“STB”) has signed a memorandum of understanding with Alipay to enhance Chinese tourists’ overall experience in Singapore with better access to information before and during their trip.

The collaboration is part of STB’s overall strategy to better engage visitors through digital channel, which will in turn increase overall visitor satisfaction, increase tourism receipts and drive repeat visits.”

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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. The Motley Fool Singapore has a recommendation for Straco Corporation.