RFM Corp. :RFMFY-US: Earnings Analysis: Q3, 2016 By the Numbers : October 26, 2016

RFM Corp. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of RFM Corp. – General Mills, Inc. (GIS-US) that have also reported for this period.


  • Gross margins widened from 35.36% to 42.31% compared to the same period last year, operating (EBITDA) margins now 12.57% from 12.22%.
  • Year-on-year change in operating cash flow of -2.71% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 62.78 75.97 55.97 66.92 62.43
Revenue Growth (%YOY) -2.9 7.46 -3.59 2.34 -0.54
Earnings (mil) 3.34 5.94 4.61 6.23 3.65
Earnings Growth (%YOY) -2.07 2.01 14.68 -4.61 9.28
Net Margin (%) 5.32 7.82 8.24 9.3 5.85
Return on Equity (%) 6.69 11.97 8.95 12.01 7.14
Return on Assets (%) 4.58 8.16 6.25 8.6 5.07

Access our Ratings and Scores for RFM Corp.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 35.36% to 42.31% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 12.22% to 12.57% compared to the same period last year. For comparison, gross margins were 43.13% and EBITDA margins were 16.12% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

RFMFY-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 66.32, compared to last year’s level of 47.97 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

RFMFY-US‘s change in operating cash flow of -2.71% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 7.59% to 7.94% and (2) one-time items. The company’s pretax margins are now 8.52% compared to 7.55% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for RFM Corp.

Company Profile

RFM Corp. is engaged in processing and manufacturing of food and beverages. It operates through two segments: Institutional and Consumer. The Institutional segment, manufactures and sells flour, pasta, bakery and other bakery products to institutional customers. The Consumer segment manufactures and sells ice cream, meat, milk and juices, pasta products and flour and rice based mixes. The Company was founded by Salvador Z. Araneta, Victoria Lopez de Araneta, Jose N. Concepcion, Sr., Burton Joseph Server, Sr., Albino Z. Sycip, Zoilo Alberto, Francisco D. Gamboa Sr., Edward Miller Grimm, Leonardo Eugenio, David Sycip and Charles Parsons on August 16, 1957 and is headquartered in Makati, Philippines.

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