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

Riverstone Holdings Limited (SGX: AP4) is a Malaysia-based company that manufactures gloves that are used in the healthcare as well as cleanroom industries.

In early May, the company announced its 2018 first quarter 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 2018’s first quarter:

Source: Riverstone 2018 first quarter earnings press release

We can see that Riverstone enjoyed a mixed quarter. Although its revenue inched up by 2.0%, its net profit had declined by 7.6%.

The positives

Firstly, Riverstone’s revenue was up 2.0% year-on-year, as mentioned earlier, mainly due to growth in its sales volume. This was offset by the strengthening of the Malaysian ringgit against the US dollar.

Secondly, the company’s expansion plan is on track and is now in Phase 5. Under Phase 5, Riverstone’s total annual gloves production capacity will increase from 7.6 billion pieces at end-2017 to 9 billion pieces by the end of 2018. Moreover, Riverstone also has Phase 6 of its expansion plan, which will expand its manufacturing capacity to 10.4 billion gloves by end-2019. In other words, investors should expect more growth coming from the company.

Lastly, Riverstone’s balance sheet remained strong with a net cash position of RM 111.6 million as of 31 March 2018.

The negatives

Firstly, Riverstone’s gross profit margin for the reporting quarter was 22.4%, down from 25.2% in the same period a year ago. This was mainly due to the aforementioned negative currency movement, and a 23% increase in gas input prices.

Secondly, the glove manufacturer’s net profit for the reporting quarter fell by 7.6% year-on-year to RM 31.1 million, as mentioned earlier. This came about despite the higher revenue, and was partly the result of a rise in the company’s costs of production.

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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 on Riverstone.