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, announced its financial results for the six months ended June 30, 2024.

Ms. Li Peng Leck, Executive Chairperson and Executive Director of Davis Commodities, commented, “Our performance is shaped by fluctuations in commodity prices and shipping costs. We view certain unfavorable circumstances as transient. Through our well-established logistics supply chain, our goal is to alleviate the effects of these fluctuations. Moreover, we are committed to broadening our market presence, not only by reinforcing our market shares in the existing markets but also by considering venturing into new territories in an effort to expand our market share and reduce regional risks. Additionally, we intend to leverage the longstanding relationships we have with our business partners to capitalize on opportunities in emerging markets.”

First Half of Fiscal Year 2024 Financial Highlights

  • Revenue was $66.9 million for the six months ended June 30, 2024, compared to $97.8 million for the same period of the last fiscal year.
  • Gross profit was $2.9 million for the six months ended June 30, 2024, compared to $4.2 million for the same period of the last fiscal year.
  • Income from operations was $1.1 million for the six months ended June 30, 2024, which decreased by 50.0% from $2.2 million for the same period of the last fiscal year.
  • Net income was $1.3 million for the six months ended June 30, 2024, which decreased by 35.0% from $2.0 million for the same period of the last fiscal year.
  • Basic and diluted earnings per share were $0.05 for the six months ended June 30, 2024, compared to $0.08 for the same period of the last fiscal year.

Revenue

Total revenue was $66.9 million for the six months ended June 30, 2024, which decreased by 31.6% from $97.8 million for the same period of the last fiscal year. This decrease was mainly attributable to a decrease in demand for palm oil from our customers, compared to the same corresponding period.

 
  For the Six Months Ended June 30,
  2023       2024
($ thousands)  Revenue     Cost of Revenue     Gross Margin     Revenue     Cost of Revenue     Gross Margin
Sale of sugar   49,413       49,009       0.8%       44,891       43,759       2.5%
Sale of rice   10,129       7,925       21.8%       13,964       12,966       7.1%
Sale of oil and fat products   38,019       36,393       4.3%       8,021       7,234       9.8%
Sale of others   203       198       2.5%       –       –       –
Total   97,764       93,525       4.3%       66,876       63,959       4.4%
 
  • Revenue from sales of sugar was $44.9 million for the six months ended June 30, 2024, which decreased by 9.1% from $49.4 million for the same period of the last fiscal 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 changes of import tariffs and regulation in Vietnam made it more costly for the sugar importers to import.
  • Revenue from sales of rice was $14.0 million for the six months ended June 30, 2024, which increased by 37.9% from $10.1 million for the same period of the last fiscal year. The rice prices were favorable during this period due to increased purchases by African countries.
  • Revenue from sales of oil and fat products was $8.0 million for the six months ended June 30, 2024, which decreased by 78.9% from $38.0 million for the same period of the last fiscal year. The significant revenue drop was due to a sharp upward trend in palm oil prices, peaking in 2022, followed by a price drop in 2023 that spurred demand. The favorable pricing and increased demand drove strong revenue growth in our oil and fat products, particularly within the African market segment in 2023. A partial price recovery in 2024 posed a challenge to sales volumes, as some customers sought alternatives in response to the upward price trend.
  • Revenue from sales of others was $0 for the six months ended June 30, 2024, compared to $0.2 million in the same period of the last fiscal year. The sale of others represented random sales of tomato paste based on customer requests and orders.

A breakdown of revenue in terms of geographic regions for the six-month periods ended June 30, 2023 and 2024 is summarized below:

                                               
    For the six months ended June 30,                
($ thousands)   2023     %     2024     %     Variance     Change (%)
Africa   $ 49,211       50.3     $ 40,112       60.0       (9,099)       (18.5)
China     11,842       12.1       5,762       8.6       (6,080)       (51.3)
Indonesia     14,056       14.4       –       –       (14,056)       (100.0)
Vietnam     2,371       2.4       2,734       4.1       363       15.3
Other countries     20,284       20.8       18,268       27.3       (2,016)       (9.9)
Total revenue   $ 97,764       100.0     $ 66,876       100.0       (30,888)       (31.6)
                                               
  • Revenue from the Africa market declined 18.5% for the six months ended June 30, 2024. The sales of rice and oil and fat products that were significantly decreased contributed to it.
  • Revenue from the China market experienced a decrease of 51.3%. The global price increased, hence Chinese importers turned to purchases within their domestic market to meet their supply requirements.
  • The Company was not awarded sugar tenders in the Indonesian market for the six months ended June 30, 2024, hence there was not any revenue from Indonesia.
  • Revenue from the Vietnamese market demonstrated growth, representing a 15.3% growth, which is attributable to an increase of demand for premixed sugar from Vietnam to China. The sugar sales generally increased due to the higher sales to Vietnam’s premixed importers.
  • The overall global prices of sugar and other commodities can significantly impact revenue for exporting countries and consequently lead to a dip in sales.

Cost of Revenue

Cost of revenue was $64.0 million for the six months ended June 30, 2024, which decreased by 31.6% from $93.5 million for the same period of the last fiscal year. The decrease was primarily due to the decreased revenue as described above, which was due to a lower demand for the Company’s sugar and oil products from customers. Accordingly, the cost of revenue increased correspondingly, due to the increased sales of rice.

Gross Profit and Gross Margin

Gross profit was $2.9 million for the six months ended June 30, 2024, which decreased by 31.0% from $4.2 million for the same period of the last fiscal year. The drop in rice profit margin is mainly due to intense competition from origin producers and sharp increases in supply chain costs, resulting in a significantly thinner profit margin, making previous profitability levels hard to achieve in the current reporting period.

Overall gross margin was 4.4% for the six months ended June 30, 2024, compared to 4.3% for the same period of the last fiscal year.

Operating Expenses

Operating expenses were $1.8 million for the six months ended June 30, 2024, which decreased by 10.0% from $2.0 million for the same period of the last fiscal year.

  • Selling and marketing expenses were $0.4 million for the six months ended June 30, 2024, which decreased by 42.9% from $0.7 million for the same period of the last fiscal year. The decrease was primarily due to a decrease in sales commissions payable as a result of the decrease in revenue.
  • General and administrative expenses were $1.3 million for the six months ended June 30, 2024, which remain unchanged from $1.3 million for the same period of the last fiscal year. There was a slight increase in expenses associated with the Company’s listing in 2023, primarily driven by higher audit fees, legal fees, listing fees, director fees, and professional fees.

Other Income and Interest Expense

Other income was $0.6 million for the six months ended June 30, 2024, which increased by 200.0% from $0.2 million for the same period of the last fiscal year. Contributing to such increase was the reversal of impairment loss from last financial year, interest income earned and the government grant received.

Interest expense was $0.09 million for the six months ended June 30, 2024, which increased by 350.0% from $0.02 million for the same period of last fiscal year. The increase was due to interests incurred on additional borrowings such as a loan from a related party which was drawn down on July 6, 2023, as well as additional finance lease facility which was drawn down on June 15, 2023.

Profit before Tax and Income Tax Expense

Profit before tax was $1.6 million for the six months ended June 30, 2024, which decreased by 30.4% from $2.3 million for the same period of the last fiscal year. Correspondingly, income tax was $0.3 million for the six months ended June 30, 2024, which decreased by $0.1 million from $0.4 million for the same period of last fiscal year.

Net Income

Net income was $1.3 million for the six months ended June 30, 2024, which decreased by 35.0% from $2.0 million for the same period of last fiscal year.

Basic and diluted earnings per share were $0.05 for the six months ended June 30, 2024, compared to $0.08 for same period of the last fiscal year.

Financial Condition

As of June 30, 2024, the Company had cash and cash equivalents of $1.4 million, compared to $1.3 million as of December 31, 2023.

Net cash provided by operating activities was $0.2 million for the six months ended June 30, 2024, as adjusted primarily by (i) the non-cash operating items of $0.42 million, such as depreciation of property, plant and equipment, fair value adjustment, reversal of impairment loss and interest, and (ii) a decrease in operating assets of $0.7 million. Net cash provided by operating activities was $0.05 million for the six months ended June 30, 2023, as adjusted primarily by (i) the non-cash operating items of $0.005 million, such as depreciation of property, plant and equipment, interest expense, adjustment of fair value and interest, and (ii) the decrease in operating assets of $1.9 million.

Net cash used in investing activities was $0.005 million for the six months ended June 30, 2024, attributable to the purchase of property, plant and equipment of $0.005 million. Net cash used in investing activities was $0.3 million for the six months ended June 30, 2023, attributable to the purchase of property, plant and equipment of $0.3 million and interest received from a convertible loan to a related party.

Net cash used in financing activities was $0.2 million for the six months ended June 30, 2024, which was attributable to the repayment of bank loans of $0.1 million, payment of finance lease of $0.02 million and payment of lease liabilities of $0.02 million. Net cash provided by financing activities was $0.2 million for the six months ended June 30, 2023, which was mainly attributable to a loan from a related party and proceeds from a finance lease; offset by repayments of bank borrowings and payment of finance lease and lease liabilities.

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 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 six months ended June 30, 2024. 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 U.S. Securities and Exchange Commission.

For more information, please contact:

Davis Commodities LimitedInvestor Relations DepartmentEmail: investors@daviscl.com

Celestia Investor RelationsDave LeungPhone: +852 9494-3413Email: investors@celestiair.com

               
DAVIS COMMODITIES LIMITED AND ITS SUBSIDIARIESUNAUDITED 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,  
  2023     2024  
  US$’000     US$’000  
Assets              
Current assets:              
Cash and cash equivalents   1,330       1,363  
Accounts receivable, net   15,267       14,095  
Prepaid expenses and other current assets, net   6,131       6,346  
Inventory   537       152  
Total current assets   23,265       21,956  
Property, plant and equipment   633       608  
Right-of-use asset   73       55  
Loan to a related party   5,907       6,089  
               
               
Total non-current assets   6,613       6,752  
               
               
TOTAL ASSETS   29,878       28,708  
               
Liabilities              
Current liabilities:              
Bank loans – current   207       213  
Lease payable – current   36       37  
Finance lease – current   29       29  
Accounts payable   14,323       13,200  
Accruals and other current liabilities   3,850       3,033  
Income taxes payable   713       285  
Total current liabilities   19,158       16,797  
Bank loans – non-current   323       213  
Lease payable – non-current   38       19  
Finance lease – non-current   101       87  
Total non-current liabilities   462       319  
TOTAL LIABILITIES   19,620       17,116  
               
Commitments and contingencies   –       –  
               
Shareholders’ equity              
Ordinary shares US$0.000000430108 par value per share; 232,500,000,000 authorized as of              
December 31, 2023 and June 30, 2024; 24,500,625 shares issued and outstanding**   *       *  
Additional paid-in capital   3,151       3,151  
Merger reserve   1,113       1,113  
Retained earnings   5,981       7,315  
Accumulated other comprehensive income   13       13  
Total shareholders’ equity   10,258       11,592  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   29,878       28,708  
               

* Denotes amount less than US$1,000.** Retrospectively restated for the effect of a 2,325-for-1 share subdivision.

     
DAVIS COMMODITIES LIMITED AND ITS SUBSIDIARIESUNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME(Amount in thousands, except for share and per share data, or otherwise noted)
                 
    For the six-month period ended  
    June 30,  
    2023     2024  
    US$’000     US$’000  
Revenues     97,764       66,876  
Cost of revenues     (93,525 )     (63,959 )
Gross profit     4,239       2,917  
Operating expenses:                
Selling and marketing expenses     (720 )     (439 )
General and administrative expenses     (1,324 )     (1,346 )
Total operating expenses     (2,044 )     (1,785 )
Income from operations     2,195       1,132  
                 
Other income/(expense):                
Other income     155       583  
Interest expense     (18 )     (90 )
Total other income     137       493  
Income before tax expense     2,332       1,625  
Income tax expense     (381 )     (291 )
Net income     1,951       1,334  
Other comprehensive income                
Foreign currency translation loss, net of taxes     7       *  
Total comprehensive income     1,958       1,334  
Net income per share attributable to ordinary shareholders                
Basic and diluted   $ 0.08     $ 0.05  
Weighted average number of ordinary shares used in computing net income per share                
Basic and diluted**     23,250,000       24,500,625  
                 

* Denotes amount less than US$1,000.** Retrospectively restated for the effect of a 2,325-for-1 share subdivision.

 
DAVIS COMMODITIES LIMITED AND ITS SUBSIDIARIESUNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Amount in thousands, except for share and per share data, or otherwise noted)
               
  For the six-month period ended  
  June 30,  
  2023     2024  
  US$’000     US$’000  
Net income   1,951       1,334  
Adjustments:              
Depreciation and amortization   30       48  
Unrealized loss/(gain) on derivative contract at fair value   3       (59 )
Reversal of impairment loss   –       (314 )
Interest expense   15       86  
Interest expense on finance lease   *       2  
Interest expense on lease liability   –       2  
Interest income   (43 )     (181 )
    1,956       918  
Changes in operating assets:              
Decrease in inventories   1,698       385  
(Increase)/decrease of accounts and other receivables   (15,987 )     1,330  
(Increase) in deferred offering costs   (209 )     –  
Increase/(decrease) in accounts and other payables, and accruals   12,816       (1,979 )
(Decrease) in income tax payable   (224 )     (428 )
Increase in operating lease liabilities   1       –  
Cash provided by operating activities   51       226  
               
Interest received   43       –  
Purchase of property, plant and equipment   (299 )     (5 )
Cash (used in)/provided by investing activities   (256 )     (5 )
               
Amount due to related parties   114       –  
Proceeds from finance lease   144       –  
Repayment of bank borrowings   (67 )     (104 )
Interest paid   (15 )     (48 )
Principal payment of finance lease   (2 )     (14 )
Principal payment of lease liabilities   –       (18 )
Payment of interest on finance lease   *       (2 )
Payment of interest on lease liabilities   –       (2 )
Cash provided by/(used in) financing activities   174       (188 )
               
Net change in cash and cash equivalents   (31 )     33  
Cash and cash equivalents as of beginning of the period   2,540       1,330  
Cash and cash equivalents as of the end of the period   2,509       1,363  
               
Supplementary Cash Flows Information              
Cash paid for taxes   (601 )     (719 )
Operating lease asset obtained in exchange for operating lease obligations    150       –  
               

* Denotes amount less than US$1,000

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