Supermax has a substantial investment in the UK, thus risks related to Brexit must be mitigated

by DASHVEENJIT KAUR/ pic by RAZAK GHAZALI

MALAYSIA’S second-largest rubber glove maker Supermax Corp Bhd is reaping the benefits of the crossfire between Washington and Beijing.

However, its business remains vulnerable in the UK as the outlook for Brexit still hangs in the balance.

Founder and president Datuk Seri Stanley Thai Kim Sim (picture) said a 10% increase is expected in Supermax’s medical and industrial gloves export to the US, following its trade war with China.

The increase would then push total exports to the US to 40%, boosted mainly by sales of medical gloves.

“The accelerating tariff war had created a trade diversion to Asian countries, and Malaysia has signalled to be a major beneficiary.

“This augurs well for the company’s capacity expansion and growth in the US, particularly,” he told reporters during Supermax’s fourth-quarter briefing in Kuala Lumpur last Friday.

The US had imposed 15% tariffs on medical gloves and 25% on industrial gloves from China on Sept 1 and Jan 1, 2019, respectively.

“This is unfortunate, but it also creates an opportunity for Malaysian manufacturers to increase their market presence in the US,” he said, adding that market share for Supermax would increase by 10% as demand is set to rise further.

Thai believes that the trade war had disrupted the global supply chain and would go on until the next US presidential election in November 2020.

He also expects prices of raw materials like natural rubber to decline as a result of the trade diversions, in tandem with the anticipated fall in demand for natural rubber.

“Currently, the natural rubber price stands at US$1,100 (RM 4,598.55) per tonne and there is room for it to fall to US$900 (RM3,762.45) per tonne as the US-China trade war will slow down demand for car tyres in China. Thus, this will depress the (natural rubber) price further,” he added.

Meanwhile, on Brexit, Thai said Supermax has a substantial investment in the UK, thus risks must be mitigated.

“As for now, we will be doing currency hedging between the pound and the ringgit, but I know the British pound will remain great.

“Although there was volatility in the currency market, including the weak ringgit, I was optimistic all along that the US dollar would strengthen and we will do whatever necessary to protect our margins, especially on the operational side,” Thai added.

Supermax’s export footprint spans across over 160 countries globally including the US, Latin America, European Union, Middle East, Asia and South Pacific countries.

It has eight distribution centres cum corporate offices based in the US, Brazil, Canada, Ireland, the UK, Hong Kong, Singapore and Japan, while it is collaborating with over 1,200 independent distributors globally.

As for Malaysia, the company owns 11 factories, manufacturing various types of latex and nitrile gloves.

By next year, Supermax is expected to have a 25% increase in total production capacity after the rebuilding and replacement of older and less efficient production lines and the construction of the new factory, Plant 12, at Meru, Klang.

Additional to that, the construction of Plants 13, 14 and 15 will increase the capacity further by another 61% by 2024.

“This capacity increase will see 55% catering to the medical and hospital markets, 35% to dental and laboratory, and 10% to automotive, food, beauty and nursing homes,” Thai said.

On production, he said the company aims to produce 27 billion pieces by December 2020 from the current 21.75 billion pieces, and plans to boost it to 44.1 billion pieces by 2024.

Supermax has allocated RM1.1 billion in capital expenditure for the next 4½ years.

For the financial year ended June 30, 2019, Supermax’s net profit rose to RM123.75 million from the RM106.66 million registered in the same period a year ago, while revenue was up at RM1.49 billion versus RM1.3 billion previously.