Higher condom sales boost Karex profit for 1Q21

The heightened emphasis on hygiene also resulted in an increased demand for medical products and catheters

by AFIQ AZIZ

KAREX Bhd remains optimistic for stronger sales of condoms in the coming quarters despite physical-distancing rules to limit coronavirus spread denting sales worldwide.

The world’s largest condom maker posted a net profit of RM4.46 million in the first quarter ended Sept 30, for the financial year 2021 (1QFY21), compared to a net loss of RM167,000 recorded in the corresponding quarter.

Revenue rose 6.27% from RM95.73 million to RM101.73 million, driven by condom sales from the sexual wellness segment and record-high contribution from the medical segment, the company noted in a filing to the stock exchange yesterday.

“Despite the challenges in navigating global supply chain disruptions arising from the Covid-19 pandemic, condom sales to US’ region, in particular, continued to expand and contributed positively to the profitability during the current quarter,” said Karex.

It added that a favourable sales mix during the quarter coupled with improved cost control initiatives, such as the incorporation of automation, led to better-operating efficiency, resulting in a profit before tax of RM7 million and profit after tax of RM 5.2 million for the quarter.

“As manufacturing operations begin to return to the new normal and logistic networks continue to reopen, condom sales led to a recovery in revenue from the previous quarter.

“The heightened emphasis on hygiene also resulted in an increased demand for medical products such as probe covers and catheters during the quarter,” said Karex.

Karex added that the ongoing Covid-19 pandemic has presented a unique challenge to the sexual health and medical devices industry, causing widespread disruptions to operations and supply chains.

The company said along with the emphasis on social compliance, this has caused consolidation in the industry and disruption to the supply of condoms globally.

For 1QFY21, the group generated RM35.7 million of revenue for the US market, RM23.7 million in Africa, RM21.4 million in Europe and RM20.9 million for the Asia market.

“In spite of this, condoms remain an essential tool for family planning, as well as preventing the spread of HIV and other sexually transmitted infections,” it added.

Moving forward, Karex remains optimistic to overcome the aforementioned operation hurdles in order to take advantage of potential opportunities presented by the renewed global emphasis on hygiene and disease prevention.

“Our manufacturing experience, cost competitiveness and breadth of offerings are compelling competitive advantages that will allow us to capture orders within the condom space that has been shifting from a government subsidised model to one that is more commercial in nature during recent times.

“In addition, our branded segment is also expected to expand into new regions during the year, enabling us to continue to capture a greater share of the value within the industry,” it added.

Karex’s main business activities consist of investment holding, manufacturing and sale of sexual wellness, medical and other health-related products, of which these activities are principally located in Malaysia, Thailand, the US and Europe.

Karex’s share price closed 0.5 sen or 0.57% lower at 87.5 sen yesterday, valuing the group at RM877.08 million.