KUALA LUMPUR (Feb 21): Karex Bhd sank into the red for the second quarter ended Dec 31, 2021 (2QFY22), posting a net loss of RM2.81 million against a net profit of RM2.79 million a year ago, amid rising raw material costs and additional distribution expenses.

The condom maker is set to offer new products including medical gloves in the near future, as it seeks to capitalise on new market trends.

In a filing on Monday (Feb 21), Karex said rising raw material costs, coupled with a higher sales contribution from its tender segment negatively affected profit margins during the quarter.

“In addition, persistent disruptions to global logistics networks resulted in additional distribution costs of RM800,000 that also pressured profitability during the quarter.”

Revenue slipped 10.57% to RM103.51 million, from RM115.75 million in 2QFY21.

In 1QFY22, Karex had posted a net profit of RM769,000 on revenue of RM95.98 million.

The group said q-o-q revenue growth was driven by higher condom sales volume from the tender market, but added that the less favourable sales mix combined with higher raw material costs had resulted in a net loss in the quarter under review.

For the six-month period (6MFY22), the group reported a net loss of RM2.04 million versus a net profit of RM7.24 million in the same period a year earlier, while revenue retreated 8.27% to RM199.5 million from RM217.48 million.

Karex attributed the lower revenue to slower condom sales to the tender market in the Asia and Africa regions, while the net loss in 6MFY22 was due to the increased raw material costs, continued global logistics networks disruptions, as well as persistent Covid-19 related expenditure.

Looking forward, Karex said measures such as lockdowns, quarantines or reorganising health services implemented by governments and health authorities around the world have drastically impacted the sexual health and medical devices industry.

“According to the World Health Organization, access to birth control is one of the sexual and reproductive health issues that has been most impacted by the pandemic,” it added.

However, the group said in spite of this, it continues to make strides in establishing its position as a global leader in these industries, with a commendable sales growth during the last few years.

“We continue to leverage on our manufacturing expertise and cost competitiveness to capture orders in markets where many governments have shifted the onus of family planning from a state-provided model to the private sector in recent years,” it said.

Karex said as vaccination rates ramp up, economic restrictions relax and societies adapt to the post-pandemic, the recommencement of social interactions is expected to drive the immediate term demand for condoms and lubricants. 

“This transition is also expected to present unique opportunities arising from greater e-commerce literacy, as well as heightened awareness of personal hygiene and disease prevention.

“In order to capitalise on new market trends that are expected to arise, the group is poised to expand its product portfolio in terms of capacity, as well as variety, to offer products such as medical gloves in the near future,” the group added.

Karex’s share price settled unchanged at 40 sen on Monday, giving the group a market capitalisation of RM421.38 million.