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

The market appears to like rubber gloves manufacturer Riverstone Holdings Limited’s (SGX: AP4) latest earnings update, released on 6 August 2018. Since then, Riverstone’s share price has increased by 5.6% while the Straits Times Index (SGX: ^STI) – Singapore’s stock market benchmark – has fallen by 1.3%.

Let’s look at both the negatives as well as positives found in Riverstone’s 2018 second quarter results.

The positives

Firstly, the company’s net profit jumped by 23.9% year-on-year to RM 33.6 million despite its revenue inching up by just 0.5% to RM 214.2 million. Lower raw material costs as well as operating expenses helped Riverstone’s bottom line.

Secondly, Riverstone’s expansion plan is on track and is currently in Phase 5. The fifth phase will increase the company’s total glove production capacity from 7.6 billion pieces per year to 9 billion pieces by the end of 2018. There’s also Phase 6 in the plan, which is projected to expand Riverstone’s annual glove production capacity to 10.4 billion pieces by 2019. In other words, investors should expect more growth from the company.

Thirdly, Riverstone ended the second quarter of 2018 with a strong balance sheet that had a net-cash position (total cash minus total debt) of RM 70.5 million.

The negatives

Firstly, the company’s operating cash flow for 2018’s second quarter declined from RM 37.6 million a year ago to RM 26.3 million because of growth in inventories and receivables.

Secondly, the company commented in the earnings update that it will continue to face pressure from competition, fluctuations in currency and raw material prices, and higher production costs. All these factors could impact the underlying profitability of the company in the future.

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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 for Riverstone Holdings.