The Good And The Bad: What Investors Should Know About Riverstone Holdings Limited’s Latest First Quarter Earnings
Riverstone Holdings Limited (SGX: AP4) is a Malaysia-based company that produces rubber gloves for both the cleanroom and healthcare industries.
Two weeks ago, Riverstone released its 2017 first quarter earnings. There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:
1. The overall numbers
Here’s a table showing some important numbers from Riverstone’s income statement for the first quarters of 2017 and 2016:
Source: Riverstone 2017 first quarter earnings release
Simply put, Riverstone turned in a positive performance in the first quarter of 2017. It experienced strong growth in both revenue and profit.
2. The positives
Firstly, Riverstone’s revenue growth was due to higher demand for its premium healthcare and cleanroom gloves. According to management, the company’s efforts to tap new markets for cleanroom gloves has allowed it to expand beyond the HDD (hard disk drive) market into the mobile, tablet, and LCD markets.
Secondly, the company has plans to further grow its business. It’s on track to expand its annual production capacity from 6.2 billion gloves currently to 7.2 billion by the end of this year. This will be followed by another phase that will bring its production capacity to 8.6 billion by the end of 2018. Then, there’s potentially another expansion phase that will see its capacity grow to 10 billion gloves per year by end-2019.
3. The negatives
Firstly, the increase in costs of production – such as raw materials and labour – continue to pose a significant challenge to Riverstone. Although the company enjoyed strong profit growth in the first quarter of 2017, its gross margin declined from 29.1% a year ago to 25.2%.
Secondly, Riverstone expects continued competition from other rubber glove makers. This is all the more so as Riverstone is expanding into the medical gloves market, which is currently dominated by much larger companies such as Top Glove (SGX: BVA)(KLSE: 7113.KL).
The first quarter of 2017 was a strong one of Riverstone, all things considered. But, investors should continue to keep an eye on how well the company is managing its rising cost of production.