KUALA LUMPUR: Glove maker Supermax Corp Bhd's earnings fell 52.6% to RM24.40 million in the first quarter ended March 31, 2011 from RM51.47 million a year ago as its margins were eroded by high latex prices and the weaker US dollar.
The company said on Friday, May 13 that revenue rose 9.4% to RM241.37 million from RM220.65 million a year ago while earnings per share declined to 7.18 sen from 18.97 sen.
'While revenue has grown for the current quarter compared to the corresponding quarter last year, profit margins have been eroded mainly due to continuous high latex prices and unfavourable exchange rates,' it said.
Supermax said the average latex price (per kg/wet) had increased by 45.8% to RM10.18 in the 1Q2011 compared with RM6.98 a year ago while the ringgit had strengthened to 3.05 against the US dollar from 3.37.
The company said the continuous rise in latex costs and the weakening of the US dollar were persistent challenges faced by the rubber glove industry.
'Nevertheless, management is taking all possible measures to tackle these headwinds and minimise their effects. Glove prices are raised in tandem with latex price increases and Management has taken steps to adjust glove prices on a more regular basis to pass through the cost increases. Cost-cutting measures are also being put in place,' it said.
However, Supermax said the good news was that since mid-April, 2011, natural rubber latex prices were on the decline from the all time high of RM10.87 per kg wet on April 7, 2011 to RM9.46 per kg wet on May 6, 2011.
On the prospects, it said rubber glove demand is still robust. While demand had normalised to 45 days to 60 days lead times in 3Q 2010, demand has come back strongly and lead times have again stretched to 75 ' 90 days.
It said the buyers had accepted the high latex prices and replenished their stocks. Some buyers, it said, switched their demand from powder free natural rubber (NR) gloves, which are now the most expensive range of gloves, to nitrile gloves which are currently cheaper than even powdered NR gloves.
Supermax explained that traditionally, nitrile gloves were 15% to 20% more expensive than powder-free NR gloves.
On the current operations, Supermax said it had switched more of its production lines to produce nitrile glove up to 33% currently and possibly up to between 40%-45% of total installed capacity.
'This is in line with the growing demand for nitrile gloves from the hospital sector as nitrile glove prices are now lower than natural rubber latex glove prices.
'Should the demand for nitrile gloves continue to rise, the group is well placed to meet the market demands as up to 70% of the group's production lines are built to be inter-switchable between natural rubber and nitrile rubber,' it said.
The company said on Friday, May 13 that revenue rose 9.4% to RM241.37 million from RM220.65 million a year ago while earnings per share declined to 7.18 sen from 18.97 sen.
'While revenue has grown for the current quarter compared to the corresponding quarter last year, profit margins have been eroded mainly due to continuous high latex prices and unfavourable exchange rates,' it said.
Supermax said the average latex price (per kg/wet) had increased by 45.8% to RM10.18 in the 1Q2011 compared with RM6.98 a year ago while the ringgit had strengthened to 3.05 against the US dollar from 3.37.
The company said the continuous rise in latex costs and the weakening of the US dollar were persistent challenges faced by the rubber glove industry.
'Nevertheless, management is taking all possible measures to tackle these headwinds and minimise their effects. Glove prices are raised in tandem with latex price increases and Management has taken steps to adjust glove prices on a more regular basis to pass through the cost increases. Cost-cutting measures are also being put in place,' it said.
However, Supermax said the good news was that since mid-April, 2011, natural rubber latex prices were on the decline from the all time high of RM10.87 per kg wet on April 7, 2011 to RM9.46 per kg wet on May 6, 2011.
On the prospects, it said rubber glove demand is still robust. While demand had normalised to 45 days to 60 days lead times in 3Q 2010, demand has come back strongly and lead times have again stretched to 75 ' 90 days.
It said the buyers had accepted the high latex prices and replenished their stocks. Some buyers, it said, switched their demand from powder free natural rubber (NR) gloves, which are now the most expensive range of gloves, to nitrile gloves which are currently cheaper than even powdered NR gloves.
Supermax explained that traditionally, nitrile gloves were 15% to 20% more expensive than powder-free NR gloves.
On the current operations, Supermax said it had switched more of its production lines to produce nitrile glove up to 33% currently and possibly up to between 40%-45% of total installed capacity.
'This is in line with the growing demand for nitrile gloves from the hospital sector as nitrile glove prices are now lower than natural rubber latex glove prices.
'Should the demand for nitrile gloves continue to rise, the group is well placed to meet the market demands as up to 70% of the group's production lines are built to be inter-switchable between natural rubber and nitrile rubber,' it said.
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