Supermax’s 4Q earnings soar by 2,554% on pricing power

by SHAZNI ONG/ pic by BERNAMA

SUPERMAX Corp Bhd said it’s seeing the emergence of new consumers and new consumption not seen prior to Covid-19, following heightened demand for gloves as personal protection equipment (PPE) needed in fighting the pandemic.

This comes after the glovemaker recorded its best-ever quarterly financial performance in the April to June 2020 period with a 2,553.68% jump in earnings to RM399.62 million from RM15.06 million in the same period last year.

“Currently, the group is in an oversold position. The surge in demand has resulted in a rapid rise of average selling prices (ASPs) since March 2020.

“Governments all over the world have increased healthcare spending budgets to contain the effects of the pandemic and in preparation of a possible second or more waves,” Supermax said in a Bursa filing yesterday.

In light of these developments, it expects demand to remain buoyant in 2021 and beyond.

Revenue for the fourth quarter stood at RM929.12 million, up 147.1% higher compared to RM375.96 million a year ago.

The group’s performance was mainly due to an exponential rise in demand for medical gloves and other PPEs on the back of the Covid-19 pandemic.

It was also helped by additional production capacity from the newly commissioned lines at plant #12 block A-lines and an increase in ASPs each month starting from March 2020 for the firm’s manufacturing and distribution divisions.

Further support came from an increased percentage of the group’s capacity and global sales to end-users, including sales to governments and government agencies of countries where the group operates, and from the glove producer’s own brand manufacturing (OBM) with two streams of income via manufacturing and distribution.

As at June 30, 2020, the group had cash and bank balances of RM1.18 billion compared to RM173.8 million a year before.

“The increase is mainly due to customers paying 30%, 40% and 50% deposits in advance to secure supply,” Supermax stated.

Under the group’s OBM model, 55% of production is exported under its own brands via its own distribution centres and 40% through independent distributors. The remaining 5% is for original equipment manufacturer production.

The firm exports its products to over 165 countries. The Americas region contributed 51% of revenue in the financial year ended June 30, 2020 (FY20), while Asia/Oceania and Europe each contributed 23% to FY20 revenue.

“Due to the current robust demand, we are taking the opportunity to build new relationships with new customers and distributors in anticipation that they will continue with repeat orders post-pandemic,” it said.

The glovemaker is planning to invest RM1.3 billion to build five glove manufacturing plants between now and up to 2022. The additional production capacity of 22.25 billion will allow it to make a total of 48.42 billion gloves by end-2022.

“The highest ASPs have not been reflected in this current quarter and we are optimistic that our OBM cum distribution business model will exhibit even healthier performance in the coming quarters,” it added.

For the cumulative 12 months, Supermax’s net profit jumped to RM525.59 million from RM123.11 million in FY19, while revenue rose 38.6% to RM2.13 billion from RM1.54 billion previously.

The group is proposing a final dividend via the share dividend distribution on the basis of one treasury share for every 45 ordinary shares held in the company.

This is on the premise that new bonus shares pursuant to the proposed bonus issue of shares, which was announced earlier, are approved at the upcoming EGM on Aug 18, 2020, and duly allotted (share dividend) in respect of FY20, for shareholders’ approval at the forthcoming 23rd AGM.

Shares of Supermax closed 7.5% or RM1.72 lower at RM21.20 yesterday, valuing the glovemaker at RM28.84 billion.