We’re at the tail end of the earnings season. As it is with every earnings season, there are companies that post growth, companies that deliver mixed results, and companies that experience declines.
Let’s take a closer look at two companies that saw their businesses grow in the latest reporting quarter:
1. On 3 August 2018, Sembcorp Industries Limited (SGX: U96) released its 2018 second quarter earnings update.
As a quick introduction, Sembcorp Industries is a conglomerate with four major business segments: Utilities; Marine; Urban Development; and Others. The Marine segment comes from Sembcorp Industries’ 61% ownership stake in Sembcorp Marine Ltd (SGX: S51).
In the second quarter of 2018, Sembcorp Industries’ revenue improved by 46.6% year-on-year to S$3.34 billion. Net profit attributable to shareholders followed suit with a 46.8% increase to S$81.92 million. But, investors may want to note that Sembcorp Industries’ EBIT (earnings before interest and taxes) actually fell by 13% to S$192 million. The company’s net profit attributable to shareholders improved because of lower finance costs, higher share of results from associates and joint ventures, lower tax expenses, and a significant deterioration in profit attributable to minority interests (from a positive S$2.9 million to a negative S$17.3 million).
As of 30 June 2018, Sembcorp Industries’ net debt position stood at S$8.33 billion; the balance sheet had weakened from a year ago when the net debt position was S$7.97 billion.
Sembcorp Industries expects the market environment to “remain challenging in 2018.” The company is concerned that “rising trade and geopolitical challenges could potentially increase volatility and dampen global growth” despite a broader-based global recovery being underway. But, Sembcorp Industries also expressed its confidence in its strategies and capabilities.
2. Rubber gloves manufacturer Riverstone Holdings Limited (SGX: AP4) released its 2018 second quarter earnings update on 7 August 2018.
During the reporting quarter, Riverstone experienced a slight 0.5% year-on-year increase in revenue to RM 214.2 million. However, its gross profit managed to increase by 10.6% to RM 48.3 million, mainly due to lower material costs. The gross profit growth, along with a significant improvement in “other operating expenses” (from RM 3.5 million a year ago to RM 0.5 million), led to a 23.9% jump to RM 33.6 million in profit attributable to shareholders.
Riverstone also kept its balance sheet healthy. As of 30 June 2018, the company’s borrowings stood at RM 22.0 million, while its cash and equivalents stood at RM 92.5 million, giving it a net cash position of RM 70.5 million.
In Riverstone’s latest earnings update, the company’s executive chairman and CEO, Wong Teek Son, shared the following useful comments on the glove maker’s current performance and future:
“Despite continued macroeconomic challenges such as foreign exchange rate volatility and fluctuations in raw material prices, we remain in growth mode. Internally, we are focused on improving operational efficiency, tightening cost controls and progressively introducing automation within our production processes. Furthermore, our ability to generate strong positive operating cash flows coupled with a resilient balance sheet will allow us to navigate the headwinds as we continue to chart steady growth.
We have completed the construction of our new plant for phase 5 of our capacity expansion plans. Accordingly, we will be gradually commissioning production lines over the remainder of FY2018 as we continue our growth trajectory. This will bring our total annual production capacity from 7.6 billion gloves to 9.0 billion gloves by end FY2018.
While increasing total production capacity, we are also intensifying sales and marketing efforts to increase order allocation from new and existing customers. Concurrently, our customised solutions which make our gloves viable in new contexts and markets continue to gain traction with customers. As a mark of confidence in the Group’s future operations and to reward shareholders, the Board of Directors is pleased to declare an interim dividend of 1.30 sen (RM).”
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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.