The Motley Fool

The Good And Bad That Investors Should Know About Riverstone Holdings Limited’s Latest Quarterly Earnings

Riverstone Holdings Limited (SGX: AP4) is a Malaysia-based producer of rubber gloves that are used in the cleanroom and medical gloves industry.

In early February, the company reported its 2017 fourth quarter and full year earnings update. There are both positive and negative takeaways that investors may want to learn about. But first, let’s run through the company’s numbers.

The results

Here’s a condensed income statement from Riverstone for 2017:

Source: Riverstone 2017 fourth quarter earnings press release

We can see that 2017 was a good year for Riverstone, with strong growth in revenue and gross profit. Pre-tax profit and net profit also managed to grow in the high single-digit range.

The positives

Firstly, Riverstone’s revenue was up a strong 24.8% in 2017, mainly due to growth in sales to existing and new customers. In particular, Riverstone’s sales to the US market surged 43.7% to RM158.6 million during the year.

Secondly, the company’s expansion plan is on track. It ended 2017 with an annual production capacity of 7.6 billion gloves, up from 6.2 billion gloves at end-2016. Riverstone will be undertaking Phase 5 of its expansion plan, which will bring its production capacity to 9.0 billion gloves by the end of 2018. The company also has plans for Phase 6, which would allow it to manufacture a total of 10.4 billion gloves per year by end-2019. So, investors can expect Riverstone to continue growing over the next few years.

Thirdly, operating costs grew at a slower rate of 9% to RM 40.0 million (this consists of selling and distribution expenses, and general and administrative expenses) compared to revenue growth due to effective cost-management on the part of the company’s leaders.

Lastly, Riverstone’s balance sheet remained strong with a net cash position of RM 89.3 million as of 31 December 2017.

The negatives

Firstly, Riverstone’s gross margin was down from 26.4% in 2016 to 24.2% due to a drop in the average selling price for its healthcare gloves, and a change in its product mix.

Secondly, Riverstone was negatively affected by currency movements in 2017, as it clocked a net foreign exchange loss of RM 13.0 million, reversing a gain of RM 9.28 million enjoyed in 2016.

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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 buy recommendation for Riverstone.