The earnings season is coming 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. Let’s take a look at two companies that delivered mixed numbers recently:
1. In late February, Riverstone Holdings Limited (SGX: AP4) announced its 2017 fourth quarter and full year earnings update.
As a quick introduction, Riverstone is a Malaysia-based company that produces rubber gloves that are used in the cleanroom and healthcare industries.
In the fourth quarter of 2017, Riverstone reported revenue of RM 210.7 million, up 15.1% year-on-year. But, its operating profit fell by 2.2% year-on-year to RM 40.5 million mainly due to lower average selling prices for its products, and a change in its sales mix. As a result, Riverstone’s net profit declined 5.0% year-on-year to RM 34.2 million.
On other positive notes, Riverstone ended 2017 with a strong balance sheet that had a net cash position of RM 89.3 million (cash and equivalents of RM 114.3 million, and total borrowings of RM 25 million), and raised its full-year dividend for 2017 by 7.9% from 6.49 sen to 5.70 sen.
In Riverstone’s earnings update, CEO and executive chairman, Wong Teek Son, shared some comments on the company’s latest results and future:
“Our Phase 4 expansion plans were successfully implemented at the end of 2017. With the added capacity contributed by the newly commissioned seven production lines, the Group currently amasses an annual capacity of 7.6 billion gloves, further allowing us to capitalise on the burgeoning global demand for both cleanroom and healthcare gloves……
…We previously announced plans to hike our production capacity to 10.4 billion pieces of gloves by end of 2019, marking a 36.8% growth from 7.6 billion production capacity we have at present. As we enter into 2018, we are on track to undertake Phase 5 of our expansion plans which will add an additional 1.4 billion gloves, bringing our total annual production capacity to 9.0 billion gloves by the end of the year.”
2. In mid-February, food & beverage retailer Old Chang Kee Ltd (SGX: 5ML) released its third quarter earnings update for its financial year ending 31 March 2018 (FY2018). The reporting quarter was for the three months ended 31 December 2017.
As a quick introduction, Old Chang Kee has been around since 1956, growing from a single stall outside Rex Cinema to 92 outlets in Singapore as of 31 December 2017. Old Chang Kee may be best known for its signature Curry’O puff, a popular Singapore snack.
In the reporting quarter, Old Chang Kee’s revenue improved by 9.6% year-on-year to S$22.2 million. The company enjoyed revenue contributions from new outlets, and higher sales from existing outlets. These offset lost revenues from stores that were closed.
But despite the higher revenue, Old Chang Kee’s quarterly net profit declined by 9.3% to S$1.24 million, mainly due to an increase in raw material costs and higher rent.
In its earnings release, Old Chang Kee shared the following on its outlook:
“The Group’s first flagship outlet in central London, United Kingdom is on track to open in 2018, generating new revenue streams for the Group and uplifting Old Chang Kee’s brand positioning.
On the current operations, the Group expects rental, labour and raw material costs to remain high in the next reporting period and the next 12 months, and believes that the labour market will continue to remain tight.
Following completion of the new factory facilities and the commissioning of new factory equipment, the Group will be focusing its efforts on improving its gross margins and revenues. These efforts include continuing investment in brand positioning such as the Group’s sponsorship of the movie ‘Ah Boys to Men 4’, bulk purchases at more favourable prices with the expanded factory space, further expanding its product range and increasing the production efficiency of its factories, in order to grow the business both locally and regionally.”
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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 on Riverstone Holdings.