Davis Commodities Limited Announces First Half of Fiscal Year 2023 Unaudited Financial Results
- 66.6% increase in net income
- Stable total revenue
- Earnings per share rose to $0.08 from $0.05 for the same period last year
- Successful IPO on Nasdaq
- Decrease in total revenue by 2.9%
- Decrease in gross profit by 36.4%
- Revenue decline in sugar and rice sales
- Increased interest expense
Insights
Analysis of Davis Commodities Limited's financial results reveals a mixed financial performance, with a notable increase in net income by 66.6% despite a slight decrease in total revenue. This suggests that the company's cost management and strategic focus on high-margin products, such as oil and fat, are yielding positive results. The significant revenue growth from oil and fat products by 1,700% is a testament to the company's ability to capitalize on favorable market conditions, such as the high palm oil prices and subsequent demand increase.
However, the decline in revenue from sugar and rice sales raises concerns about the company's market share and competitiveness in these segments. The geopolitical and regulatory challenges, such as the delay in the release of import licenses in Vietnam and the reduction in export licenses from India, have evidently impacted sales. This underscores the importance of diversification and adaptability in the commodity trading sector, where market conditions can be volatile and regulatory changes abrupt.
The company's recent IPO and the subsequent cash influx from the offering is a strategic move that could support their expansion and brand strengthening endeavors. However, investors might be cautious due to the reduced gross profit and margin, which could indicate pricing pressures or increased competition in the market. It will be crucial for Davis Commodities to maintain its operational efficiency and cost control measures to ensure long-term profitability and shareholder value.
From a financial perspective, Davis Commodities' significant increase in net income alongside a decrease in total revenue is an indication of effective cost control and operational efficiency. The gross margin contraction from 6.6% to 4.3%, however, suggests that while net income has improved, the company is making less profit per dollar of sales, which could be a red flag for sustainability of earnings growth.
The operating expense reduction by 62.4% is impressive and contributed to the improved income from operations. This reduction, especially in selling and marketing expenses, could be a double-edged sword, as it may reflect cost-saving initiatives but could also imply a scaling back of market expansion efforts, which may not be favorable for long-term growth.
The financial condition of the company, with stable cash and cash equivalents, indicates a solid liquidity position. However, the minimal net cash provided by operating activities could be a concern for future capital needs and investment in growth opportunities. The successful IPO and the funds raised therein provide a cushion and can be seen as a positive move to support the company's strategic initiatives and enhance shareholder value.
The fluctuations in commodity prices, particularly the surge in palm oil prices, have directly benefited Davis Commodities' oil and fat product segment. The company's ability to leverage these pricing dynamics demonstrates a strong understanding of the commodity trading market. However, the sharp decline in sugar and rice sales, due to factors such as delayed import licenses and reduced export licenses, highlights the vulnerability of commodity trading to regulatory and policy changes. This emphasizes the need for a robust risk management strategy, including diversification of product lines and geographic markets.
The expansion into the African market and the significant revenue increase from this region reflect a strategic move to tap into emerging markets with potentially higher growth rates. The company's performance in the African market, with a revenue increase of 110.7%, indicates a successful penetration strategy, which could offset the losses experienced in the Asian markets.
Overall, the company's focus on operational efficiency and strategic market positioning is commendable, but it will be important to monitor how Davis Commodities navigates the challenges in the sugar and rice segments and whether it can sustain its growth in the oil and fat products market.
SINGAPORE, Dec. 29, 2023 (GLOBE NEWSWIRE) -- Davis Commodities Limited (Nasdaq: DTCK) (the "Company" or "Davis Commodities"), an agricultural commodity trading company that specializes in trading sugar, rice, and oil and fat products, today announced its unaudited interim financial results for the six months ended June 30, 2023.
Ms. Li Peng Leck, Executive Chairwoman and Executive Director of Davis Commodities, commented, “We are thrilled to share our financial results for the first half of fiscal year 2023, which recorded a notable increase of net income by
First Half of Fiscal Year 2023 Financial Highlights
- Revenue was
$97.8 million for the six months ended June 30, 2023, compared to$100.7 million for the same period of last year. - Gross profit was
$4.2 million for the six months ended June 30, 2023, compared to$6.7 million for the same period of last year. - Income from operations was
$2.2 million for the six months ended June 30, 2023, increased by79.0% from$1.2 million for the same period of last year. - Net income was
$2.0 million for the six months ended June 30, 2023, increased by66.6% from$1.2 million for the same period of last year. - Basic and diluted earnings per share were
$0.08 for the six months ended June 30, 2023, compared to$0.05 for the same period of last year.
First Half of Fiscal Year 2023 Financial Results
Revenue
Total revenues were
| For the Six Months Ended June 30, | ||||||||||||
| 2023 | 2022 | |||||||||||
| ($ thousands) | Revenue | | Cost of Revenue | | Gross Margin | | Revenue | | Cost of Revenue | | Gross Margin | |
| Sale of sugar | 49,413 | 49,009 | 81,400 | 75,666 | ||||||||
| Sale of rice | 10,129 | 7,925 | 17,188 | 16,499 | ||||||||
| Sale of oil and fat products | 38,019 | 36,393 | 2,112 | 1,867 | ||||||||
| Sale of others | 203 | 198 | - | - | - | |||||||
| Total | 97,764 | 93,525 | 100,700 | 94,032 | ||||||||
- Revenue from sales of sugar was
$49.4 million for the six months ended June 30, 2023, which decreased by39.3% from$81.4 million for the same period of last year. This decline can be attributed to various challenges, including issues related to pricing. Specifically, the Company did not secure some tenders in the Indonesian market due to pricing concerns. Additionally, the release of import licenses in Vietnam was delayed, affecting our sales in the region. - Revenue from sales of rice was
$10.1 million for the six months ended June 30, 2023, which decreased by41.1% from$17.2 million for the same period of last year. The decline was attributed to a decrease in export license issued from Indian government, which have had an impact on our ability to maintain previous sales levels in the rice market. - Revenue from sales of oil and fat products was
$38.0 million for the six months ended June 30, 2023, which increased by 1,700% from$2.1 million for the same period of last year. The increase was attributable to the palm oil prices which have experienced a significant upward trend over the past three years, reaching an all-time high in 2022. In 2023, there has been a price drop, leading to an increase in demand. The combination of favorable pricing dynamics and increased demand has contributed to the significant growth in revenue from oil and fat products, particularly in our African market segment. - Revenue from sales of others was
$0.2 million for the six months ended June 30, 2023. The sale of others represents sales of tomato paste, which was random and based on customer requests and orders.
Breakdown of revenue in terms of geographic regions for the six-month periods ended June 30, 2023 and 2022 are summarized below:
| For the six months ended June 30, | |||||||||||||||||||||||||
| ($ thousands) | 2023 | % | 2022 | % | Amount | Change (%) | |||||||||||||||||||
| US$’000 | US$’000 | US$’000 | |||||||||||||||||||||||
| Africa | $ | 49,211 | 50.3 | $ | 23,361 | 23.2 | 25,850 | 110.7 | |||||||||||||||||
| China | 11,842 | 12.1 | 6,767 | 6.7 | 5,075 | 75.0 | |||||||||||||||||||
| Indonesia | 14,056 | 14.4 | 40,758 | 40.5 | (26,702 | ) | (65.5 | ) | |||||||||||||||||
| Vietnam | 2,371 | 2.4 | 23,241 | 23.1 | (20,870 | ) | (89.8 | ) | |||||||||||||||||
| Other countries | 20,284 | 20.8 | 6,573 | 6.5 | 13,711 | 208.6 | |||||||||||||||||||
| Total revenue | $ | 97,764 | 100.0 | $ | 100,700 | 100.0 | (2,936 | ) | (2.9 | ) | |||||||||||||||
- Revenue from the Africa market experienced remarkable growth of more than doubling. The Africa’s contribution to total revenue increased to
50.3% for the six months ended June 30, 2023, from23.2% for the same period of last year. - Revenue from China market demonstrated solid growth, representing a
75.0% growth. - Revenue from Indonesia market experienced a decline of
65.5% , which can be attributed to challenges in securing tenders, affecting the Company’s ability to generate revenue from this market. - Revenue from the Vietnam market decreased
89.8% , which primarily due to the delayed release of import licenses. - Revenue from other countries increased by
208.6% , highlighting the Company’s strategic efforts in expanding its business footprint to additional regions, including Thailand, Cambodia, the Philippines, Taiwan, South Korea, and other emerging markets.
Cost of Revenue
Cost of revenue was
Gross Profit and Gross Margin
Gross profit was
Gross margin was
Operating Expenses
Operating expenses were
- Selling and marketing expenses were
$0.7 million for the six months ended June 30, 2023, which decreased by81.3% from$3.9 million for the same period of last year. The decrease was primarily due to a decrease in sales commissions payable as a result of the decrease in revenue, as well as a decrease in advertising and promotion expenditures. - General and administrative expenses were
$1.3 million for the six months ended June 30, 2023, which decreased by13.3% from$1.5 million for the same period of last year. The decrease was primarily due to a decrease in agency fees, office running costs and professional fees.
Other Income and Interest Expense
Other income was
Interest expense was
Profit before Tax and Income Tax Expense
Profit before tax was
Net Income
Net income was
Basic and diluted earnings per share were
Financial Condition
As of June 30, 2023, the Company had cash and cash equivalents of
Net cash provided by operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
Recent Development
On September 21, 2023, the Company completed its initial public offering (the “Offering”) of 1,250,625 ordinary shares at a public offering price of
About Davis Commodities Limited
Based in Singapore, Davis Commodities Limited is an agricultural commodity trading company that specializes in trading sugar, rice, and oil and fat products in various markets, including Asia, Africa and the Middle East. The Company sources, markets, and distributes commodities under two main brands: Maxwill and Taffy, and exclusively distributes the Lin brand in Singapore. The Company also provides customers of its commodity offerings with complementary and ancillary services, such as warehouse handling and storage and logistics services. The Company utilizes an established global network of third-party commodity suppliers and logistics service providers to distribute sugar, rice, and oil and fat products to customers in over 20 countries, as of the fiscal year ended December 31, 2022. For more information, please visit the Company’s website: ir.daviscl.com.
Forward-Looking Statements
Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may,” or other similar expressions. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the SEC.
For more information, please contact:
Davis Commodities Limited
Investor Relations Department
Email: investors@daviscl.com
Ascent Investor Relations LLC
Tina Xiao
Phone: +1-646-932-7242
Email: investors@ascent-ir.com
| DAVIS COMMODITIES LIMITED AND ITS SUBSIDIARIES UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (Amount in thousands, except for share and per share data, or otherwise noted) | ||||||||
| As of Dec 31, | As of Jun 30, | |||||||
| 2022 | 2023 | |||||||
| US$’000 | US$’000 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 2,540 | 2,509 | ||||||
| Accounts receivable, net | 4,656 | 18,495 | ||||||
| Prepaid expenses and other current assets, net | 7,001 | 9,156 | ||||||
| Deferred offering costs | 1,129 | 1,338 | ||||||
| Inventory | 2,176 | 479 | ||||||
| Total current assets | 17,502 | 31,977 | ||||||
| Property, plant and equipment | 399 | 669 | ||||||
| Right-of-use asset | – | 91 | ||||||
| Total non-current assets | 399 | 760 | ||||||
| TOTAL ASSETS | 17,901 | 32,737 | ||||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Bank loans – current | 157 | 167 | ||||||
| Lease payable – current | – | 36 | ||||||
| Finance lease – current | – | 29 | ||||||
| Accounts payable | 5,096 | 18,968 | ||||||
| Accruals and other current liabilities | 4,749 | 3,697 | ||||||
| Amount due to related parties | – | 114 | ||||||
| Income taxes payable | 1,357 | 1,134 | ||||||
| Total current liabilities | 11,359 | 24,145 | ||||||
| Bank loans – non-current | 528 | 451 | ||||||
| Lease payable – non-current | – | 56 | ||||||
| Finance lease – non-current | – | 113 | ||||||
| Deferred tax liabilities | 1 | 1 | ||||||
| Total non-current liabilities | 529 | 621 | ||||||
| TOTAL LIABILITIES | 11,888 | 24,766 | ||||||
| Commitments and contingencies | – | – | ||||||
| Shareholders’ equity | ||||||||
| Ordinary shares US | * | * | ||||||
| Additional paid-in capital | – | – | ||||||
| Merger reserve | 1,113 | 1,113 | ||||||
| Retained earnings | 4,895 | 6,846 | ||||||
| Accumulated other comprehensive income | 5 | 12 | ||||||
| Total shareholders’ equity | 6,013 | 7,971 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 17,901 | 32,737 | ||||||
* – Denotes amount less than US$’000.
** – Retrospectively restated for the effect of a 2,325-for-1 share subdivision.
| DAVIS COMMODITIES LIMITED AND ITS SUBSIDIARIES UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Amount in thousands, except for share and per share data, or otherwise noted) | ||||||||
| For the six-month period ended June 30, | ||||||||
| 2022 | 2023 | |||||||
| US$’000 | US$’000 | |||||||
| Revenues | 100,700 | 97,764 | ||||||
| Cost of revenues | (94,032 | ) | (93,525 | ) | ||||
| Gross profit | 6,668 | 4,239 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | (3,906 | ) | (720 | ) | ||||
| General and administrative expenses | (1,536 | ) | (1,324 | ) | ||||
| Total operating expenses | (5,442 | ) | (2,044 | ) | ||||
| Income from operations | 1,226 | 2,195 | ||||||
| Other income/(expense): | ||||||||
| Other income | 178 | 155 | ||||||
| Interest expense | (15 | ) | (18 | ) | ||||
| Total other income | 163 | 137 | ||||||
| Income before tax expense | 1,389 | 2,332 | ||||||
| Income tax expense | (218 | ) | (381 | ) | ||||
| Net income | 1,171 | 1,951 | ||||||
| Other comprehensive income | ||||||||
| Foreign currency translation loss, net of taxes | 13 | 7 | ||||||
| Total comprehensive income | 1,184 | 1,958 | ||||||
| Net income per share attributable to ordinary shareholders | ||||||||
| Basic and diluted | $ | 0.05 | $ | 0.08 | ||||
| Weighted average number of ordinary shares used in computing net income per share | ||||||||
| Basic and diluted** | 23,250,000 | 23,250,000 | ||||||
** – Retrospectively restated for the effect of a 2,325-for-1 share subdivision.
| DAVIS COMMODITIES LIMITED AND ITS SUBSIDIARIES UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amount in thousands, except for share and per share data, or otherwise noted) | ||||||||
| For the six-months period ended June 30, | ||||||||
| 2022 | 2023 | |||||||
| US$’000 | US$’000 | |||||||
| Net income | 1,171 | 1,951 | ||||||
| Adjustments: | ||||||||
| Depreciation and amortization | 28 | 30 | ||||||
| Unrealized loss on derivative contract at fair value | 8 | 3 | ||||||
| Unrealized gain on foreign exchange | (3 | ) | – | |||||
| Interest expense | 15 | 15 | ||||||
| Interest expense on finance lease | * | |||||||
| Interest expense on lease liability | * | * | ||||||
| Interest income | (26 | ) | (43 | ) | ||||
| 1,193 | 1,956 | |||||||
| Changes in operating assets: | ||||||||
| (Increase)/Decrease in inventories | (193 | ) | 1,698 | |||||
| Decrease in margin deposits | 889 | 536 | ||||||
| Decrease/(Increase) of accounts and other receivables | 1,836 | (16,523 | ) | |||||
| Increase in deferred offering costs | – | (209 | ) | |||||
| (Decrease)/Increase in accounts and other payables, and accruals | (3,175 | ) | 12,816 | |||||
| (Decrease) in income tax payable | (51 | ) | (224 | ) | ||||
| Increase in operating lease liabilities | – | 1 | ||||||
| Cash provided by operating activities | 499 | 51 | ||||||
| Dividend paid | (3,000 | ) | – | |||||
| Interest received | 26 | 43 | ||||||
| Purchase of property, plant and equipment | (7 | ) | (299 | ) | ||||
| Cash used in investing activities | (2,981 | ) | (256 | ) | ||||
| Amount due to related parties | (1 | ) | 114 | |||||
| Proceeds from bank borrowings | 578 | – | ||||||
| Proceeds from finance lease | – | 144 | ||||||
| Repayment of bank borrowings | (60 | ) | (67 | ) | ||||
| Interest paid | (15 | ) | (15 | ) | ||||
| Principal payment of finance lease | – | (2 | ) | |||||
| Principal payment of lease liabilities | (19 | ) | – | |||||
| Payment of interest on finance lease | – | * | ||||||
| Payment of interest on lease liabilities | * | – | ||||||
| Cash provided by financing activities | 483 | 174 | ||||||
| Net change in cash and cash equivalents | (1,999 | ) | (31 | ) | ||||
| Cash and cash equivalents as of beginning of the period | 7,087 | 2,540 | ||||||
| Cash and cash equivalents as of the end of the period | 5,088 | 2,509 | ||||||
| Supplementary Cash Flows Information | ||||||||
| Cash paid for taxes | (269 | ) | (601 | ) | ||||
| Operating lease asset obtained in exchange for operating lease obligations | – | 150 | ||||||
* Denotes amount less than US
FAQ
What is the ticker symbol of Davis Commodities Limited?
What were the financial highlights for the first half of fiscal year 2023?
What were the revenue figures for the first half of fiscal year 2023?
What were the revenue figures for the sale of sugar, rice, and oil and fat products?
What was the revenue breakdown by geographic regions?
What were the operating expenses for the first half of fiscal year 2023?
What was the net income for the first half of fiscal year 2023?
What was the Company's recent development?
