LKL records loss in 2Q as expenses weigh on margins

by TMR / pic by MUHD AMIN NAHARUL

LKL International Bhd expects its new glove trading business to lift its fortunes as they reported a net loss of RM1 million in the second quarter ending Oct 31, 2020 (2Q20), compared to a net profit of RM0.4 million it made in 2Q19 due to lower gross profit margin and an increase in certain administrative expenses.

Revenue for the quarter fell 9.9% year-on-year (YoY) to RM9.6 million as its manufacturing segment’s top-line contributions moderated 4.6% to RM7.2 million from RM7.6 million previously on lower sales of medical beds, while top-line contributions from manufactured medical peripherals and accessories remained relatively stable.

LKL’s trading segment’s revenue of RM2.4 million was 22.6% YoY lower due to the weaker performance of medical devices, while it registered higher sales from distributed medical peripherals and accessories, the company stated in a release yesterday.

Geographically, local sales contracted 18.8% YoY to RM6.6 million in 2Q20, making up 68.1% of the group’s total revenue compared to 75.6% in the corresponding quarter last year.

Exports accounted for 31.9% of total revenue in 2Q20 versus 24.4% a year ago, driven by a significant increase in sales from other Asian markets.

Export sales expanded 17.8% YoY to RM3.1 million in 2Q20.

Its MD Lim Kon Lian said LKL’s future prospects would be bolstered by the fulfilment of recently secured contracts, including glove supply contracts worth US$19 million (RM78.5 million) from Weihai Textile Group Import and Export Co Ltd, and US$40 million from Shang Hong International (Hong Kong) Ltd.

“Our six months’ to-date revenue outperformed last year’s corresponding period as both manufacturing and trading segments posted higher sales in the first half of financial year 2021 (1H21), highlighting the robust demand within the healthcare sector.

“We recently secured two glove export contracts from foreign companies as we extended our support to other countries and made progress towards fulfilling the contracts by commencing shipments of nitrile gloves to Weihai Textile Group Import and Export,” said Lim.

Additionally, the company delivered more than 40 units of medical beds and various medical peripherals to government healthcare providers in Sabah from October to November 2020 to support the country’s Covid-19 response.

“Going forward, medical expenditure by the public and private sectors is expected to continue being ramped up to effectively combat the Covid-19 pandemic and other illnesses. Other factors including an ageing demography and more affluent society would also reinforce the demand uptrend for high-quality healthcare,” said Lim.

Despite a weak 2Q20, LKL saw a 44.3% YoY higher revenue of RM28.9 million in 1H21, driven by higher contributions from its manufactured medical/healthcare beds, manufactured medical peripherals and accessories, as well as distributed medical peripherals and accessories businesses.

The medical/healthcare beds, peripherals and accessories provider noted that earnings for the 1H21 stood at RM0.2 million versus RM0.6 million in the previous year’s corresponding period on less favourable product mix sold and an increase in administrative expenses.

LKL’s share price closed four sen lower at 86.5 sen yesterday, valuing the company at RM409.4 million.