Supermax earnings continue to see sharp contraction in 1Q22

SUPERMAX Corp Bhd’s net profit for the first quarter ended Sept 30 (1Q22) slumped almost 100% to RM5.71 million from RM638.52 million a year earlier, with revenue dropping 83% as the average selling prices (ASPs) and demand for rubber gloves fell from their record highs a year ago.

“Over this period, profitability in absolute terms and in terms of margins have fallen away significantly,” it told Bursa Malaysia today.

Revenue for 1Q22 dropped to RM247.96 million from RM1.45 billion a year ago, Supermax’s bourse filings showed.

Earnings per share dropped to 2.1 sen from RM24.60.

Supermax said its earnings and sales continue to be adversely impacted as the Withhold Release Order imposed by the US Customs and Border Protection in October 2021 remains in place, effectively hampering efforts to import new lower-cost shipments to average down inventory costs

It also said its profitability was adversely impacted because certain of the group’s overseas distribution units are incurring losses as they continue to sell high-priced inventory at today’s low market prices. It also blamed the increased of operating costs including high gas costs and an increase in minimum wages.

Additionally, it said earnings were also affected by the incurring pre-operating expenses for its new US plant, as well as the decommissioning of certain older plants which are in the process of rebuilding.

Supermax expects the glove market will remain weak in the foreseeable future as competition continues to be intense and profit margins continue to moderate.

“The rubber glove industry is currently well into a consolidation phase, after having gone through its strongest ever growth phase historically in 2020 and 2021, triggered by the Covid-19 pandemic that had spread across the globe,” it said.

It noted that the sector’s strong growth spurt had attracted many new players into the market and encouraged existing players to ramp up production capacity to capitalise on the surging demand.

“The resulting over-supply situation coupled with demand normalising as the world comes to terms with a pandemic that is transitioning to an endemic disease has seen ASPs for gloves track lower from their record highs.

“We expect to see continued major consolidation in the rubber glove industry as ASPs and demand continue to moderate from the record highs seen at the peak of the Covid-19 pandemic,” it said.