These 2 Companies Announced Mixed 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 mixed results recently:

1. First up, I have Riverstone Holdings Limited (SGX: AP4), which released its 2018 first quarter earnings update in mid-May. As a quick introduction, Riverstone is a Malaysia-based company that produces rubber gloves that are used in the clean room as well as healthcare industries.

During the reporting quarter, Riverstone experienced a 2.0% year-on-year increase in revenue to RM 209.8 million. But, its net profit declined by 7.6% to RM 31.1 million; similarly, its earnings per share fell by 7.7% to 4.19 sen. A strengthening of the ringgit against the US dollar, and a 23% increase in gas input prices, had dinged Riverstone’s bottom line. The good thing though, is that Riverstone’s balance sheet remained rock solid – as of 31 March 2018, the company had cash and equivalents of RM 135.1 million, and total debt of just RM 23.5 million.

This is what the company said about its future plans in its latest earnings update:

“Phase 5 expansion plan is progressively being carried out in Taiping, Perak, Malaysia. By the end of December 2018 our Group will have a total annual production capacity of 9.0 billion gloves. In addition, the Group has plans to add another 1.4 billion pieces of gloves by the end of 2019 as Phase 6, giving the Group a total annual production capacity of 10.4 billion pieces of gloves. Further details will be announced in due course.

The foreign currency fluctuations particularly in US Dollars, volatile raw material prices, increase in overall production costs and competition from the other glove manufacturers remain challenging for the Group.”

There are both positive and negative takeaways from Riverstone’s outlook statement. On the former, the company is forging ahead with an expansion of its production capacity; for perspective, Riverstone ended 2017 with an annual manufacturing capacity of 7.4 billion gloves. On the negative aspect, the company expects a number of challenges to its business, such as unfavourable currency and raw material price fluctuations, a rise in production costs, and a higher level of competition.

2. Singapore Telecommunications Limited (SGX: Z74), which also released its latest earnings update in mid-May, is the next company I have. The latest results for Singapore’s largest operational telco is for the fourth quarter and full year for its financial year ended 31 March 2018 (FY2018).

In the reporting quarter, Singtel’s revenue was up by 0.4% year-on-year to S$4.33 billion, but its net profit attributable to shareholders declined by 19% to S$780.6 million, due mainly to weaker results from some of its regional associates (Airtel in India and Telkomsel in Indonesia), and adverse currency movements. On another positive note, free cash flow for the quarter grew by 4.8% year-on-year to S$799.9 million.

Sintel’s board also recommended a final dividend of S$0.107 per share for the quarter, bringing its total ordinary dividend for FY2018 to S$0.175 per share (this excludes a special dividend of S$0.03 per share). This is flat compared to the total dividend of S$0.175 per share for FY2017.

For FY2019, Singtel expects: (a) its revenue to grow in the “low single digit” range; (b) its EBITDA – earnings before interest, taxes, depreciation, and amortisation – to be “stable”; (c) capital expenditure of around S$2.2 billion; (d) free cash flow of around S$1.9 billion; (e) dividends of around S$1.4 billion from its regional associates; and (f) its dividend to be maintained at S$0.175 per share. In fact, Singtel also expects its dividend for FY2020 to be at S$0.175 per share, after which it will revert to a payout ratio of between 60% and 75% of its underlying net profit.

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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 recommendation for Riverstone Holdings.