KUALA LUMPUR: Supermax Corporation Bhd’s net profit for the first quarter ended Sept 30, 2022 (Q1FY2023) plummeted to RM5.71 million from RM638.52 million in the same preceding period as average selling prices (ASP) remained low in the face of intense competition.
The rubber glove maker, in a filing with Bursa Malaysia, reported that revenue shrank 86 per cent to RM247.97 million in Q1FY2023 from RM1.46 billion previously.
It said declining sales and profitability were due to several reasons, including stiff competition from Chinese manufacturers, who undercut prices to gain market share.
"Sales continue to be adversely impacted as the Withhold Release Order (WRO) imposed by the US Customs and Border Protection (USCBP) in October 2021 remains in place, effectively hampering efforts to import new lower-cost shipments to average down inventory costs,” it said.
It said some overseas distribution units incurred losses as they continued to sell high-priced inventory at current low market prices.
Supermax said operating costs also escalated, including high gas costs and an increase in minimum wages.,
"We are also incurring pre-operating expenses for the new US plant.
"The company is also decommissioning certain older plants, which are in the process of rebuilding,” it said.
Supermax said the rubber glove industry is currently well into a consolidation phase after having gone through its strongest-ever growth phase historically in 2020 and 2021 triggered by the COVID-19 pandemic that had spread across the globe.
"The sector’s strong growth spurt had attracted many new players into the market and encouraged existing players to ramp up production capacity to capitalise on the surging demand.
"The resulting over-supply situation coupled with demand normalising as the world comes to terms with a pandemic that is transitioning to an endemic disease has seen ASPs for gloves track lower from their record highs,” it said.
It said consolidation in the rubber glove industry is expected to continue as ASPs and demand continue to moderate from the record highs seen at the COVID-19 pandemic’s peak.
"In the foreseeable future, the market will remain weak, competition will continue to be intense and profit margins will continue to moderate,” it added. - Bernama
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