We're in the thick of quarterly earnings here in Singapore, and globally as well, and so far markets seem to have reacted fairly positively to the general bulk of the announcements.

The Dow Jones Industrial Average is hitting on all cylinders, pushing into record territory, and here in Singapore we have seen a recovery take place since the global sell-off in February.

But with earnings announcements comes some fairly interesting stories within the stories themselves. Some 'twists' if you will, or what appears to be companies scrambling to either make excuses or logical explanations for why there was a significant drop in profits, revenue, cash flow, etc.

I personally came across one yesterday with Pan United Marine. In a nutshell, we saw the company report an uptake in revenue, but profits fell significantly. Needless to say on the surface, this isn't something an investor wants to see necessarily.

As I reported, there was what I thought was a good reason for this. In Q1 of 2006, there was a disposable gain made of S$16.1 mln related to Rodolfo Mata that contributed to overall profits of S$21.7 mln for Pan United Marine.

Q1 2007 profits at the company came in at only S$11.5 mln, a 47% overall decrease from a year ago. However, if you were to exclude the Rodolfo Mata gain from the Q1 2006 figures, then profit actually doubled QoQ more or less.

These 'one-off' gains made in companies can really throw you for a loop, and really cloud the bigger picture of whether or not there was 'organic growth' or growth excluding these disposable gains.

In some cases, such as Pan United Marine, this was something that was probably a valid explanation to make to the market, and investors probably picked up on it as the stock did trade higher yesterday.

On the flip side, these companies can also use disposable gains to artificially inflate earnings, especially if the bulk of their profit is coming from that. The only downside to that is, next year, chances are the companies will have to explain something to investors as to why their profit was down (if it is), especially if the percentage of profits from that one-off disposable gain was high.

But far too often, we see companies clamoring to make excuses, point the finger, and struggling to give a reason for their rather lackluster earnings announcements so investors don't punish them on the open market. The press releases are even more hilarious to read sometimes as they tend to be filled with only the warm and fuzzy information exuding bit after bit of positive sentiments.

So to all investors out there, what do you think when you see something like what Pan United was explaining? Understandable? Think its an excuse for companies to try to cover their tracks? Chime in with your comments.
Have a great weekend everyone!

-Curtis Bergh

As always please see your licensed financial advisor before making any investment decisions