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Here Are 2 Companies That Reported Mixed Results In Their Latest Quarterly Earnings Updates

Photo credit: Rafael Matsunaga. Licence: http://creativecommons.org/licenses/by/2.0/

The earnings season had recently 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. Let’s take a look at two companies that delivered mixed results recently:

1. In late February, First Resources Ltd (SGX: EB5) released its 2017 fourth quarter and full year earnings update.

As a quick introduction, First Resources is an integrated palm oil producer. It manages over 210,000 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia.

During the reporting quarter, its revenue improved by 3.2% year-on-year to US$180.8 million, but its net profit attributable to shareholders declined sharply by 41.1% to US$34 million. Its balance sheet also weakened compared to a year ago. As of 31 December 2017, First Resources’ net borrowings stood at US$217.4 million, up from US$189.6 million at end-2016. The company’s net gearing ratio increased from 0.20 to 0.21 as a result.

First Resources enjoyed growth in revenue in 2017’s fourth quarter due to higher revenue in its refinery and processing businesses. Weaker pricing in the company’s upstream business resulted in the decline in its profit.

In its earnings update, First Resources gave some useful comments on its outlook:

“Looking ahead, the Group anticipates its production volume growth to extend into 2018 from continued yield recovery and contribution from newly mature plantations. While higher industry production volumes and competition from other edible oils are expected to influence palm oil prices, improving crude oil prices and potential domestic demand growth in Indonesia from its biodiesel mandate policy may lend some support to prices.”

2. Sembcorp Industries Limited  (SGX: U96) is another company that released its 2017 fourth quarter and full year earnings update in late February.

As a quick introduction, Sembcorp Industries is a bona fide conglomerate with four major business segments: Utilities; Marine; Urban Development; and Other Businesses. The Marine segment is made up of Sembcorp Industries’ 61% ownership stake in the Singapore-listed marine engineering firm Sembcorp Marine Ltd (SGX: S51).

The conglomerate enjoyed a 4.8% year-on-year increase in revenue to S$2.12 billion in the reporting quarter. But, its net profit sank by 84.6% to S$22.78 million mainly due to weak performances in its Utilities and Marine segments. On a positive note, Sembcorp Industries’ operating cash flow came in at a positive S$850.9 million in 2017’s fourth quarter, up significantly from the negative S$221.0 million seen in 2016’s fourth quarter; the conglomerate’s cash flow picture benefited from better inventory and payables management.

As for what lies ahead, here’s what Sembcorp Industries had to say in its latest earnings update:

“The market environment is expected to remain challenging in 2018. A broader-based global recovery is underway, aided by a rebound in investment and trade. As the Group repositions its businesses for the future, it is confident that it is well-placed to benefit from the market’s recovery.”

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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.