The Motley Fool

The Good And Bad That Investors Should Know About First Resources Ltd’s Latest Earnings Update

The market appears to like oil palm producer First Resources Ltd’s (SGX: EB5) latest earnings update, released on 13 August 2018. Since then, First Resources’ share price has increased by 2.6% while the Straits Times Index (SGX: ^STI) – Singapore’s stock market benchmark – has fallen by 0.8%.

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

The positives

Firstly, First Resources’ revenue showed strong growth of 34.5% year-on-year to US$181.0 million. This ultimately led to a 55.2% jump in net profit to US$35.9 million.

Secondly, operational metrics for First Resources came in stronger in the reporting quarter, with fresh fruit bunches (FFB) harvested up 28.7% year-on-year to 789,588 tonnes, and the crude palm oil (CPO) extraction rate up from 22.2% a year ago to 23.0%.

Thirdly, First Resources’ Plantation and Palm Oil Mills, and Refinery and Processing segments both grew their revenues in the second quarter of 2018. The Plantation and Palm Oil Mills segment experienced an 18.2% year-on-year increase in revenue to US$128.8 million, while revenue from the Refinery and Processing segments jumped by 34.9% to US$172.7 million.

Fourthly, the company’s gross profit margin had improved from 42.6% in 2017’s second quarter to 43.4%.

The negatives

Firstly, operating cash flow in the first half of 2018 was at US$48.4 million, down from US$110.9.6 million in the corresponding period a year ago. This was driven largely by negative working capital movements in the first half of 2018.

Secondly, First Resources’ net debt (total debt less cash) had increased significantly from US$164.1 million at 30 June 2017 to US$268.5 million at 30 June 2018. The good thing is that First Resources’ net gearing ratio (net debt over equity) in the second quarter of 2018 was still manageable at 0.28.

Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know--and we've laid them all out in The Motley Fool Singapore's new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge--simply click here now to claim your copy.

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.