Supermax aims to maintain profit margin

KUALA LUMPUR: Glove manufacturer Supermax Corp Bhd is looking to maintain its profit margin at 9% to 11%, which is in line with the industry’s average despite the maturing glove market.
“Going forward, the contribution from the distribution centres will be higher and it will play a role in contributing to our bottom line. This is in addition to the upgrade of older plants to improve manufacturing efficiency,” managing director Datuk Seri Stanley Thai told a press conference after the group’s AGM here yesterday.
Supermax’s net profit fell 72.6% to RM6.79 million for the three months ended June 30, 2016 compared with RM24.74 million previously, mainly due to a one-off tax incurred in respect of prior year assessments. Its 18-month net profit came in at RM153.39 million.
While a weaker ringgit could help boost earnings of export-oriented firms like Supermax, Thai said, fundamental to its sustained profit margins plan will be rising market demand and improved operational efficiency.
“Our products are medical gloves, and the demand is increasing.The currency is just one factor. We’ve to be competitive. We look internally and upgrade the old plants and technology.
“We’re not in the business of currency hedging but we monitor very closely what goes on in the currency market because our receivables are in foreign currencies. But we would like to see a stable currency situation in the long term to strategically plan for the long term,” he said.
Currently, Supermax has 11 glove manufacturing plants in Malaysia. Its cash and cash equivalent stood at RM116.14 million as at June 30, 2016.
On the group’s venture into the contact lens manufacturing business, Thai foresees bigger contribution from markets like Japan and the US.
Supermax has started selling its contact lens products in North Asia through its office in Hong Kong, with plans to introduce them to Malaysia only in 2018 as it is not seen as a priority market for the group.
“We’re applying for Medical Device Authority approval in Malaysia; we should be able to get it in the next two to three months,” Thai said.
Malaysia’s contact lens business is worth some RM350 million at the wholesale level, according to Thai.
Meanwhile, Thai believes the incoming Trump presidency, which vows to cut corporate taxes, will bode well for Supermax if it sets up a contact lens plant in the US.
“We’re prepared to enter the US market. If they implement what they had pledged during the election campaign, that is, reducing the corporate tax from 39% to 15%, then it will benefit us as a foreign investor,” he said.