5 Highlights From Riverstone’s Latest Earnings

Riverstone Holdings Limited (SGX:AP4) recently reported its financial results for the financial year (FY) ended 31 December 2020.  

The maker of specialised cleanroom and healthcare gloves posted record earnings as net profit surged 396.3% to RM647.3 million for FY 2020.

Here are 5 other interesting facts about the group’s latest earnings that investors should know about.

1. Record revenue and net profit

Riverstone recorded an 85.0% year-on-year (“yoy”) increase in revenue from RM989.0 million in FY 2019 to RM1.8 billion for FY 2020. This was attributed to higher quantity of both healthcare and cleanroom gloves being shipped. 

(Source: FY2020 corporate presentation)

Correspondingly, the Group’s gross profit rose by 351.3% yoy from RM198.9 million in FY2019 to RM897.6 million in FY 2020. The Group’s gross profit margin also improved from 20.1% to 49.1% due to higher average selling prices.

Stemming from the marked increase in sales activities, selling and distribution expense grew 25.0% yoy to RM22.0 million for FY 2020. Similarly, the Group’s general and administrative expenses rose 57.3% yoy to RM34.4 million due to the pay-out of performance incentives towards its workers. 

As a result, the Group posted a 396.3% yoy surge in net profit attributable to shareholders to a record high of RM647.3 million for FY 2020 from RM130.4 million for FY 2019.

(Source: FY2020 corporate presentation)

2. Glove demand to remain resilient 

Commenting on the Group’s FY 2020 financial performance, Executive Chairman and CEO, Mr. Wong Teek Son remarked, “In the near to medium-term, we expect demand for our healthcare examination gloves to remain robust as healthcare systems around the world continue to fulfil immediate supply shortfalls as well as replenish reserves. Apart from the healthcare segment, we continue to differentiate ourselves from our industry peers via our high-end cleanroom glove business which has experienced significant growth, driven by the advent of 5G technology and manufacturing industries including lenses, batteries and semiconductors. We remain confident that our diversified income streams and market leading position in the high-end cleanroom glove segment will ensure earnings resiliency and sustainable growth over the long-term.

3. Efficient working capital management 

Driven by robust core business performance and efficient working capital management, the Group generated robust operating cash flows of RM702.8 million for FY 2020. This bolstered balance sheet strength as the Group remains in a net cash position of RM641.9 million as at 31 December 2020. This compares to a net cash position of RM117.4 million as at 31 December 2019.

(Source: FY2020 corporate presentation)

4. Final and special dividend of 16.00 sen (RM) and 4.00 sen (RM) per share

As a mark of confidence in the Group’s future outlook and to reward its loyal shareholders, Riverstone recommended a final and special dividend of 16.00 sen (RM) and 4.00 (RM) per share respectively, bringing total dividends for the year to 22.00 sen (RM) per share. This represents a 494.6% increase from the full year dividend for FY2019 of 3.70 sen (RM) per share. 

From the diagram below, it is interesting to note that Riverstone has a history of paying dividends for 15 consecutive years from FY 2006 to FY 2020.

(Source: FY2020 corporate presentation)

5. Group capacity

Riverstone’s Phase 6 expansion plan in the Taiping, Perak, Malaysia has been completed, lifting the Group’s total annual production capacity by 1.5 billion to 10.5 billion pieces of gloves per annum.  

The Group plans to add another 1.5 billion pieces of gloves in 2021, with the first production line of this Phase ready in April 2021. By the end of 2021, the Group will have a total capacity of 12.0 billion pieces of gloves per annum. All of the new capacity (1.5 billion pieces of gloves) has been booked by customers. 

Two further phases from 2022-2023 (Phase 8-9) are projected to bring capacity by up to 1.5 billion pieces of gloves per annum to a total of up to 15.0 billion by FY 2023. The Group had acquired an additional parcel of industrial land at Bukit Beruntung in January 2021 (6,740.76 sqm) to support the expansion of production capacity for cleanroom gloves as well as the Group’s operations. 

Commenting on the Group’s capacity plans, Executive Chairman and CEO, Mr. Wong Teek Son observed, “For the foreseeable future, we believe that glove demand for healthcare and cleanroom gloves will remain high due to ongoing Covid-19 testing and vaccine rollout which require the usage of gloves. Furthermore, the rise in awareness of hygienic practices globally has led to a higher usage of gloves in the medical as well as other non-medical sectors such as F&B and retail.

In view of these prevailing trends, the completion of our latest Phase 6 capacity plan is timely, raising our total annual production capacity by 1.5 billion to 10.5 billion pieces of gloves per annum. Looking ahead, we have three further expansion phases in the near-term which will add up to 1.5 billion pieces of gloves each year to raise this figure by up to 15.0 billion pieces of gloves per annum by end-FY 2023, representing a growth rate of 42.9%. The new lines coming on-board will allow us to capture this burgeoning market to drive growth in the coming years”.

(Source: FY2020 corporate presentation)

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