KUALA LUMPUR (Oct 31): Supermax has cautioned that the next few quarters are expected to be “bumpy” and challenging for the rubber glove manufacturer due to difficult market conditions, including the highly-overstocked position of many glove buyers, the current low demand and oversupply which has led to low average selling prices (ASP) after bumper earnings in FY21.
“For the near and medium term, the outlook is expected to remain gloomy and will be reflected in the business and financial performance of the company (Supermax) in the quarters ahead.
“Nevertheless, the company is taking all measures possible to manage best the prevailing challenging business environment for the rubber glove sector,” Supermax said in its latest 2022 annual report filed on Bursa Malaysia.
Following the record-breaking year in FY21 when the group achieved its best ever performance on the back of the Covid-19 pandemic which caused demand and ASPs to sky-rocket, Supermax said it was inevitable that the industry would see a return to some form of normalcy, as the threat posed by the pandemic waned.
While Supermax did not record the same extraordinary performance in the preceding year, it noted that the follow-through positive impact from the pandemic was still evident at the start of the financial year and helped the group to record another set of strong numbers for the full financial year, well exceeding the numbers posted prior to the Covid-19 pandemic.
For the financial year ended June 30, 2022 (FY22), Supermax reported a sales revenue of close to RM2.7 billion and profit before tax of over RM1 billion.
“The current business environment is indeed challenging, but the Supermax group has been through many periods of adversity and it has, through extraordinary leadership, astute management and a capable and supportive workforce, always met those challenges head-on and prevailed.
“The current challenges are on a scale not seen previously but Supermax has built up a solid balance sheet and has appropriate plans in place which will help see them through the difficult period ahead and come back in good stead when the market recovers."
Supermax also observed that global demand for gloves has been steadily rising at a rate of 8%–10% per year on the average over the years, but surged exponentially during the peak of the Covid-19 pandemic.
It said the buying frenzy had seen many buyers ending up in a heavily overstocked position, as pandemic concerns waned amid the roll-out of vaccination programmes across the world and the frantic demand for gloves inevitably subsided.
As such, the glove industry is now at a stage where demand is relatively muted, as the buyers gradually clear their inventory.
“The super-normal profits and huge potential of the rubber glove industry had seen many new players jump onto the bandwagon.
“With existing players also ramping up capacity to meet the surge in demand at the time, an over-supply situation has developed. This factor, together with the aforementioned waning demand has seen increasing downward pressure being exerted on ASPs,” it added.
Besides the prevailing demand-supply dynamics, Supermax said the industry is also faced with an environment of rising costs.
Energy costs in the form of electricity and natural gas costs have risen this year following rate hikes, while labour costs have also risen following the increase in minimum wages from RM1,200 to RM1,500 in May.
Additionally, the ongoing Ukraine-Russia conflict is adding pressure to the supply chain and driving up other related costs.
Supermax’s share price closed two and a half sen or 2.66% higher to 96.5 sen on Monday (Oct 31), valuing the glove maker at RM2.55 billion. Year-to-date, its share price has fallen 34.35%.