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These 2 Companies Announced Weaker Results Recently

We’re at the tail-end of the earnings season. 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 weaker results recently:

1. StarHub Ltd (SGX: CC3), Singapore’s second largest operational telco, released its 2018 first quarter earnings in early May.

The telco’s revenue and profit attributable to shareholders both declined compared to a year ago. The former fell by 4.7% to S$561.0 million, while the latter came in 14.9% lower at S$61.5 million. The decline in the company’s revenue was mainly driven by weaker performances in its Mobile and Pay TV segments (revenue declines of 7.1% and 10.0%, respectively).

As of 31 March 2018, StarHub’s net debt stood at S$684.6 million, and its debt to EBITDA ratio was at 1.09. The telco also proposed a dividend of 4 cents per share in the reporting quarter, unchanged from a year ago.

In its earnings update, StarHub gave the following succinct comment on its outlook:

“Based on the current outlook, we expect our guidance on our Group’s 2018 service revenue to be 1% to 3% lower YoY.  Group’s service EBITDA margin is expected to be between 27% to 29% after the adoption of SFRS(I) 15. We chose service EBITDA margin as it excludes margin on equipment sales, which better reflects the margin of our core business.

In 2018, CAPEX payment, excluding spectrum payment of S$282.0 million and building payment of S$31.6 million, is expected to be 11% of total revenue. We intend to pay a quarterly cash dividend of 4 cents per ordinary share for FY2018.”

2. Bumitama Agri Ltd (SGX: P8Z) is another company that released its 2018 first quarter earnings update in early May.

As a quick introduction, Bumitama Agri is a palm oil producer. Its primary business activities are the cultivation of oil palm trees, the harvesting of fresh palm fruit bunches, the processing of the bunches into crude palm oil and palm kernel oil, and the sale of the oils to refineries. The company has over 180,000 hectares of plantation land located in three provinces in Indonesia, namely, Central Kalimantan, West Kalimantan, and Riau.

For the first quarter of 2018, Bumitama Agri reported a 9.1% year-on-year decline in revenue to IDR 1,908 billion. Similarly, its profit attributable to shareholders fell by 16.8% to IDR 231.8 billion. The company’s weaker business performance was due to lower average selling prices for its products, as the table below shows.


Source: Bumitama Agri earnings update

Operationally, Bumitama Agri had showed improvement. Its production volume for fresh fruit bunches (FFB) grew by 19.1% year-on-year to 967,061 tonnes, while its sales volume for crude palm oil (CPO) was up 3.2% year-on-year to 205,859 tonnes.

As for its outlook, this is what the company had to say in its earnings update:

“Palm oil and other competitive edible oil production volume, crude oil prices and global demand are key determinant of palm oil prices. The lower estimated soybean oil volume and stronger estimated demand of biodiesel in both Indonesia and Malaysia will balance higher palm oil production vis-à-vis FY2017 and therefore lend support to the palm oil prices.

The Group anticipates improvement in its production volume in 2018 due to continued yield recovery, implementation of best management practices and contribution from newly matured plantations. The Group will continue to strengthen its business strategies, especially in areas of debt and cash management amid rising financing costs in the current economic environment.”

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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.