KUALA LUMPUR: Careplus Group Bhd is not expecting to repeat its impressive earnings growth level seen in the first quarter of financial year 2015 (1QFY15) for the remaining three quarters, which saw its net profit surge 102.7% to RM2.5 million for the three months ended March 31, 2015, from RM1.23 million a year ago.

Revenue grew 19.2% to RM44.6 million in 1QFY15 from RM37.41 million in 1QFY14 on the back of higher sales and lower latex prices.

Careplus group chief executive officer and executive director Lim Kwee Shyan said the ACE Market-listed glove manufacturer is not expecting to match its 1Q growth.

“We will try to sustain our profit position for the next few quarters, but we cannot assume that the growth momentum will be the same [as 1QFY15] moving forward,” he told The Edge Financial Daily in an interview.

Lim said with another half-year to go, it was too early to predict whether FY15 will be another record year for Careplus. "All we can say is that it will be an interesting year," he added.

Careplus (fundamental: 0.45; valuation: 0.8) posted a record net profit of RM3.17 million on revenue of RM152.15 million for its financial year ended Dec 31, 2014 (FY14), mainly due to better margins and an increase in production capacity.

Going forward, Careplus will spend RM48 million to increase its production lines to 26 by the 2Q of next year, from 20 currently, to meet global demand for gloves.

Lim said the group is looking at increasing its production output with the installation of the six new lines.

For FY14, the group achieved an annual capacity of 2.34 billion pieces of gloves from the 20 production lines across the group's three factories (Factory 1, 3 and 4) in Senawang, Negeri Sembilan. The group’s Factory 2 is currently non-operational.

“Three new production lines will be completed this year, and an additional three lines by the second quarter of 2016,” he said.

Like the big four players in the rubber glove industry — Top Glove Corp Bhd, Kossan Rubber Industries Bhd, Hartalega Holdings Bhd and Supermax Corp Bhd, Careplus will also continue to invest in process automation.

“Automation is definitely vital to improving production efficiency and thus improving production output. However, our business model also stresses a lot on serving the right customer, and serving the customer well,” said Lim.

He added that being able to cater to the requirements of different customers is what has helped the company to grow to where it is today.

“Customers have different requirements when it comes to gloves, be it the colour, thickness, mould, and being able to meet these differentiating requirements is how we have maintained our customer base,” said Lim.

Lim also said so far, the weak ringgit and the softening rubber latex price have offset some of the impact of the 10% increase in natural gas tariff to RM16.70 per mmbtu from RM15.20 per mmbtu on July 1, 2015.

“We will have to look at the rubber latex price and the movement in foreign exchange rates in the second half of the year to assess whether or not to increase our selling prices. We will work this out with our customers [as well],” he said.

Currently, the group’s customers are mainly concentrated in Latin America, which constituted 70% of its sales in FY14, while 17% of its products are sold to the Asia-Pacific.

“Brazil is our main market, followed by Hong Kong and Japan. Moving forward, we are looking to venture into new markets like North America, Canada and Australia,” said Lim.

Lim has a 27.44% stake in Careplus, while its chairman Peter Yew holds a 13.88% stake through his private vehicle, Thinking Cap Sdn Bhd.

Year to date, Careplus' share price has surged by 80% from 42.5 sen on Jan 2, 2015 to close at 76.5 sen last Friday. Its market capitalisation stood at RM182.08 million.

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This article first appeared in The Edge Financial Daily, on July 6, 2015.