Supermax earnings double in Q3 as glove demand soars

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KUALA LUMPUR, May 20 – Supermax Corporation Bhd’s net profit doubled to RM71.06 million in the third quarter (Q3) ended March 31, 2020, from the RM34.62 million recorded a year earlier.

Revenue rose 24 per cent, or about RM86 million, to RM447.25 million amid higher global sales of natural rubber and nitrile rubber gloves, it said.

“The increase in the group’s overall sales was mainly due to surge in sales from its overseas distribution centres as a result of an exponential surge in demand due to the COVID-19 pandemic (as well as) higher average selling prices achieved by the glove manufacturing division (in Malaysia) following the global rush in stocking up on personal protective equipment (PPE) products including medical gloves,” it said in a filing with Bursa Malaysia today.

In addition, there was an increase in output after new production lines were commissioned at its latest plant during the quarter, it said.

For the nine-month period, Supermax’s net profit rose to RM125.97 million from RM108.70 million, while revenue grew to RM1.20 billion from RM1.11 billion previously.

The company said as result of the COVID-19 outbreak, the prices of oil and raw materials had fallen.

Specifically, nitrile and natural rubber material prices had declined by 11 per cent and six per cent year-on-year (y-o-y), respectively, it said.

Quarter-on-quarter (q-o-q), nitrile and natural rubber material prices dropped 7.3 per cent and 2.5 per cent, respectively.

At the same time, the US dollar has strengthened against the ringgit by 2.18 per cent y-o-y and 0.36 per cent q-o-q.

“The pandemic has brought Supermax bumper profits beginning March/April 2020 for both the distribution division from the seven countries where the group operates and the glove manufacturing division in Malaysia,” it said.

Meanwhile, in a statement, founder Datuk Seri Stanley Thai said the surge in demand for gloves due to the COVID-19 outbreak had stretched Supermax’s oversold position as the usual four-month working inventory was sold within weeks.

“To cope with this demand, Supermax will fast forward its expansion plans to well-position the group in protecting lives against this COVID-19.

“We expect the demand for gloves to remain strong over the next 1.5 to two years at the very least and the prospects from distribution, manufacture of gloves and contact lens division to remain robust,” Thai said.

Supermax is building three new factories to allow the company to capitalise on the exponential growth in demand of medical gloves, reduce its widening capacity oversold position, and increase overall capacity to cater to the acute global shortage of PPE.

In March, it entered into an agreement to purchase another piece of industrial land in Meru, Klang, on which the company plans to build plant number 16.

Construction work has already began on two plants and work on a third plant would start soon.

According to him, the three plants will add 12 billion pieces per annum to the group’s installed capacity to 38.18 billion gloves when they are completed and began commercial production fully by 2022.

The group would invest RM715 million in capital expenditure to boost production capacity, he said.