Aspen secures US$100m glove sales contract

Aspen secures US$100m glove sales contract
-A +A

KUALA LUMPUR (Jan 13): Aspen (Group) Holdings Ltd, which is diversifying from property into glove making, has secured a glove sales and distribution contract worth US$100 million.

In a statement today, Aspen said its subsidiary Aspen Glove Sdn Bhd (AGSB) had entered into a sales and distribution agreement with a distributor for the offtake of its entire 2021 production.

The production is estimated to be approximately 1 billion pieces of nitrile medical grade examination gloves and natural rubber medical grade examination gloves to be produced from May 1, 2021 to Dec 31, 2021.

With the agreement, AGSB has secured US$100 million in sales on the assumption of a provisional average selling price of US$100 per one thousand pieces of gloves.

Pursuant to the agreement, the distributor has paid AGSB a cash deposit amounting to US$2 million, being 2% of the value of the secured sales.

The agreement is initially for the year 2021 production and renewable thereafter subject to mutual agreement.

It is also noted the gloves will be distributed on an original equipment manufacturing (OEM) basis to the European Union (EU) and United States (US) markets with the required licences being in place for the sale and distribution.

Aspen president and chief executive officer Datuk M Murly said the sales and distribution arrangement will allow AGSB to penetrate the EU and US markets, which are the group’s target markets, and capture the market demand for medical grade examination gloves.

“From here, we are also able to expand our customer base globally,” he said.

"The entry into this agreement relieves us of the need to manage sales and to negotiate with various parties. We can now focus our efforts on accelerating our expansion plans under Phase 1b to include an additional six lines, [of] which production is now expected to commence progressively from 3Q21 onwards and to also bring forward Phase 2 for another 12 lines, to commence progressively from 2Q22 onwards,” he added.

With the sales of US$100 million and acceleration of the additional 18 lines in 2021 and 2022, AGSB is expected to contribute significantly to the growth in revenue and profit of the group for the financial year ending Dec 31, 2021, he said.

Meanwhile, the group announced that as at the date of this announcement, AGSB had completed the superstructure for the production building of the manufacturing facility and the glove dipping line machineries are being constructed on-site.

Construction of the facility is expected to be completed as scheduled i.e. by March 31, 2021, and production trial is expected to commence from April 1, 2021 onwards, it said.

Full operations are anticipated by May 1, 2021 and first shipment by May 2021, according to the statement.

The group also anticipated for work to go on as scheduled despite the 14-day Movement Control Order (MCO 2) reinstated by the government and the state of emergency declared by the Yang di-Pertuan Agong as construction of the glove manufacturing facilities is allowed to continue.

It noted the group had prior to MCO 2, put in place contingency plans on construction and machinery supply management in order to better manage and expedite the construction of its glove manufacturing facilities and commencement of the productions.

“The glove manufacturing industry is also deemed as part of the essential services which are allowed to operate during MCO 2,” it said.

At the time of writing, the Singapore SGX-Catalist-listed firm rose 3 cents or 12.5% to 27 cents, valuing the company at S$292.48 million.

Surin Murugiah