Supermax 4Q net profit slips 19.9% dragged down by start-up costs

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KUALA LUMPUR (Feb 27): Supermax Corp Bhd, the world's second largest rubber gloves maker by volume, saw its net profit slip 19.9% to RM20.07 million or 2.95 sen for the fourth quarter ended Dec 31, 2014 (4QFY14) from RM25.05 million or 3.68 sen a year ago, dragged down by start-up costs for its new lines at its two new plants in Meru, Klang.

Revenue in 4QFY14, however, rose 34.6% to RM258.75 million compared with RM192.24 million in 4QFY13, as the group had fully recovered from the fire at one of its plants in the quarter under review and also benefited from a stronger US dollar which had appreciated by 5%.

In a filing with Bursa Malaysia today, Supermax attributed the lower profitability to start-up costs incurred as the group continued to install and test-run brand new lines at its two new plants in Meru.

"These initial costs and will not be a factor once all the lines have been installed and are running at optimum levels," it said.

For the full year of 2014 (FY14), its net profit fell 15.8% to RM100.8 million from RM119.72 million the previous year, while revenue declined 4.6% to RM1.01 billion from RM1.05 billion in FY13.

Nevertheless, Supermax (fundamental: 1; valuation: 0.6) is proposing a final dividend of 3 sen per share for FY14 for the approval of the shareholders at a forthcoming annual general meeting (AGM).

"Average selling prices have been trending flat to lower in 2014 in tandem with lower raw material prices and rising competition in the nitrile division," said Supermax.

"While we are increasing production output of nitrile gloves in line with the current market demand, we have been maintaining our manufacturing margins of nitrile glove at between 9% and 11% to be in line with global market prices, especially nitrile gloves from China and Thailand. This is in line with our objective to be globally competitive," it added.

In a separate filing with Bursa Malaysia today, Supermax said it intends to seek its shareholders’ approval at the upcoming AGM on the proposed appointment of Tan Sri Rafidah Aziz as its chairman and independent non-executive director.

"Upon obtaining shareholders’ approval on the proposed appointment, Supermax's executive chairman and group managing director (MD) Datuk Seri (Stanley) Thai Kim Sim will be redesignated to group MD (only).

"The proposed appointment and redesignation reinforce clear division of roles and responsibilities between the chairman and group MD respectively and are in line with the recommendation of Malaysian Code on Corporate Governance 2012," said Supermax.

Supermax shares closed one sen or 0.46% higher at RM2.19 today, with a market capitalisation of RM1.48 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)