Insights

Riverstone’s First-Half Results: Solid Performance Amid Covid-19

Riverstone Holdings Limited (SGX: AP4) is well-positioned to grow over the next few years. Here’s more on its latest impressive first-half earnings. – Coronavirus stocks

Recently, Riverstone Holdings Limited (SGX: AP4) recently announced its first-half results for 2020.

As a quick introduction, Riverstone is a Malaysia-based company operating in two key areas of the rubber gloves industry: cleanroom gloves and medical gloves.

Here are three key takeaways that investors should know about from its most recent results.

Overall financials

Riverstone reported one of the best first-half results for over a decade.

Revenue grew 31% year-on-year to RM 627 million (US$151 million) on the back of higher demand for products such as healthcare examination gloves, cleanroom gloves, and facemasks.

Gross profit surged by 108% to RM 198 million thanks to revenue growth and margin expansion. Consequently, net profit for the reporting period improved by 138% year-on-year to RM 138 million.

Executive Chairman and CEO, Mr. Wong Teek Soon commented:

“While we remain supported by current industry tailwinds, we continue to focus on internal initiatives such as adopting automation to improve productivity and reduce our reliance on labour.

On the other hand, our in-house R&D team continues to monitor industry trends closely and develop new products that will allow us to venture into untapped markets including the food processing, pharmaceutical and surgical glove segments.

For our cleanroom glove business, we continue to build on our reputation as a technological front-runner by delivering highly customised solutions and cutting-edge products to maintain our market-leading position.

With these initiatives in place, we have cultivated a business model that supports earnings resiliency and drives long-term sustainable growth.”

Future plans

Awareness of hygienic practices has risen globally, which has led to higher usage of gloves in the medical sector, as well as other non-medical sectors such as F&B and retail.

Hence, the Malaysian Rubber Glove Manufacturers Association (MARGMA) has projected an 11% growth in rubber glove demand, reaching approximately 330 billion pieces in 2020.

In response, Riverstone launched a new three-year expansion plan at a new production site in Taiping, which would grow its capacity by 1.4 billion pieces per year to bring annual capacity to 14-15 billion pieces of gloves by FY 2023.

Balance sheet

Riverstone’s strong financial performance has bolstered its balance sheet strength. As of 30 June 2020, it has RM 274 million in cash and cash equivalents and just RM 10 million in debt.

Having a strong balance sheet is necessary for Riverstone to withstand any short-term challenges amid the outbreak of Covid-19.

Moreover, it will also allow the company to invest in new plants to sustain its growth.

Foolish conclusion

Overall, Riverstone delivered a commendable quarter with improving metrics across the board.

Moreover, it is embarking on a new growth plan which should sustain its business expansion over the next few years.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.

The Motley Fool Hong Kong Limited(www.fool.hk) 2020

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