Bumper 1Q for glove maker Supermax as net profit rises over 30 times to RM790m

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KUALA LUMPUR (Oct 27): Supermax Corp Bhd today posted a record quarterly net profit of RM789.52 million, up almost 32 times from RM24.75 million a year ago, thanks to the continued booming demand for rubber gloves amid the Covid-19 pandemic. 

The glovemaker’s bumper earnings for its first quarter ended Sept 30, 2020 came as revenue surged 265.6% to RM1.35 billion, from RM369.94 million a year ago. 

The group attributed the stellar earnings growth to higher average selling prices for gloves and continuous robust gloves demand. 

“Supermax’s already sound financial position has strengthened dramatically, most notably to a net cash position with cash and bank balances amounting to RM2.36 billion as of Sept 30, 2020. This is mainly due to high collections from increased sales where customers pay between 30% to 50% deposits in advance to secure supply,” said the glovemaker in a filing. 

It also noted that its products are sold to over 165 countries and it currently exports 58% of production under its own brands via its own distribution centres and 40% through independent distributors. 

“Due to the current robust demand, we are taking the opportunity to build new relationships with new customers and distributors in anticipation that they will continue with repeat orders post pandemic,” the group added. 

In terms of capacity expansion in Malaysia, Supermax said it has put in place expansion plans of building five glove manufacturing plants between now and 2022. 

“This will yield additional production capacity of 22.25 billion, making a total of 48.42 billion gloves by the end of year 2022. The Supermax Group will invest a total capital expenditure of RM1.39 billion for the new plants,” it said. 

Meanwhile, the group said, the vulnerability to disruption of personal protective equipment (PPE) supply chains and over-dependence on imports is the primary concern of governments around the world. 

“To address this major concern in countries where Supermax operates, we are reinvesting the earnings derived from our distribution centres into the respective countries in particular in the United States and the United Kingdom. 

“We are now in the planning stages and will kick-start the US and UK projects in 1H2021 and target commission in stages starting 1H2022,” it said. 

The capital expenditure earmarked for the US is US$300 million for phase 1 and US$250 million for phase 2, totalling US$550 million, and for the UK, it is £50 million. 

Supermax has also decided to enter into face mask manufacturing in Malaysia and Canada. 

“This is to complement our existing global supply chain that the group has built over the years. We have started delivery of millions of masks to the government in Canada since early October 2020,” it said. 

During the quarter, Supermax has also witnessed expansion in both its manufacturing and distribution contributions. 

“We are optimistic that our own brand manufacturing (OBM) cum distribution business model will exhibit even healthier performance as we are in an oversold position,” it said. 

Supermax, which was one of the top gainers on Bursa Malaysia today, closed 57 sen or 6.19% higher at RM9.78, valuing the group at RM25.05 billion. Year to date, the counter has surged 1,297%. 

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