Supermax net profit slips to RM638.52m in 1Q

By S BIRRUNTHA / Pic by BLOOMBERG

Supermax Corp Bhd statd losing pricing power saw its net profit for the first quarter ended Sept 30, 2021 (1QFY22) came in at RM638.52 million, compared to the RM789.52 million recorded in the corresponding quarter a year ago.

In a filing to Bursa Malaysia yesterday, the glovemaker said its profit margins have remained relatively high, although they have regressed compared to the corresponding quarter a year ago.  

It noted that the group’s earnings before interest, taxes, depreciation, and amortisation (EBITDA), profit before tax (PBT) and profit after tax (PAT) margins have pulled back by 13.4%, 13.7% and 14.3% respectively.  

“The margin regression is due to the fall in average selling prices (ASPs) as competition has intensified significantly following a period of substantial capacity expansion across the industry as both existing and new players ramped up their production capacities,” it said in a statement accompanying its financial results.

Nevertheless, Supermax’s quarterly revenue rose 7.6% to RM1.46 billion from RM1.35 billion previously, underpinned by the continued strong global demand for the Group’s medical gloves and other PPEs amid the Covid-19 pandemic worldwide.

The group said it recorded increased sales from the additional capacity generated by its newest plant which was commissioned during the year.

Earnings per share (EPS) for the quarter came in lower at 24.60 sen against 30.58 sen a year ago.

Supermax noted that it has declared an interim single tier dividend of five sen per ordinary share for the current financial year, which is to be paid on Jan 3 next year.

On prospects, the glovemaker said demand for gloves as a personal protective equipment remains strong as the world continues to fight the Covid-19 pandemic.  

It added that new waves continue to hit countries around the world, and continue to flare up even as more and more countries begin opening up their economic sectors and easing their standard operating procedures (SOPs).  

“Since the start of the pandemic, we have seen and continue to see the emergence of new consumers and new consumption not previously seen before prior to Covid19.

“The surge in demand since March 2020 had resulted in a rapid rise in average selling prices (ASPs). Governments all over the world have increased healthcare spending budgets to contain the effects of the pandemic and in preparation of possible more waves.  

“In light of this, we expect the demand to remain buoyant beyond 2021,” the group noted.

Additionally, Supermax said the Covid-19 vaccines which are being rolled out in many countries is widely expected to cause some moderation in terms of glove demand and consumption.  

Nevertheless, it said the group believes that it will likely be gradual and not drop sharply due to the structural change in consumption, such as new consumption, new customers and greatly heightened healthcare and hygiene awareness.

Commenting on ASPs, the glovemaker said at the height of the global surge in demand, many new glove players had jumped onto the bandwagon.  

“Many of the existing players also ramped up their capacities on a large scale especially from players who are public-listed companies based in China, Malaysia and in Thailand.  

“With the substantial increase in market supply, average selling prices have started declining with spot market prices currently much lower than contracted prices,” it noted.

On glove capacity expansion in Malaysia, Supermax said the group is currently building five glove manufacturing plants concurrently and scheduled for completion progressively.  

It added that the new plants will add 22.25 billion new capacity bringing the group’s total capacity to 48.42 billion gloves when they are fully commissioned.  

The group noted that it would invest total capital expenditure (capex) of RM1.39 billion for the new plants.

Additionally, Supermax also said it is building glove manufacturing plants closer to customers in the United States (US), as the vulnerability of disruption of personal protective equipment (PPE) supply chains or over dependence on imports have become the primary concern of governments around the world.

“To address this major concern in countries where Supermax operates, in addition to the capital expenditure that the group is putting into glove manufacturing in Malaysia, we are reinvesting the earnings derived from our distribution centres into the respective countries where Supermax operates.  

“This initiative is progressing and more details will be shared when it becomes available officially,” it said.

Shares of Supermax closed seven sen or 4% higher at RM1.82, giving it a market capitalization of RM4.95 billion.