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28 Sep 2009
Supermax Profit To Exceed Target On Swine Flu Spread

INTERVIEW: Supermax Profit To Exceed Target On Swine Flu Spread

   By K.P. Lee


     KUALA LUMPUR (Dow Jones)--Malaysian latex glovemaker Supermax Corp. (7106.KU) expects its full-year earnings to surpass its MYR72 million target, as the spread of swine flu raises demand for medical gloves, Chief Executive Stanley Thai said Friday.

   "Our original after-tax profit target for year 2009 was MYR72 million. However, we are very confident that we would be able to achieve (a result that) far exceeds the original target," Thai told Dow Jones Newswires in an interview.

   This year's results will likely beat Supermax's 2008 net profit for the year ending December 31 of MYR47 million by a significant margin, he said. The company had already posted earnings of MYR45.5 million for the half year in 2009; a result that also surpasses street estimates. 

   A Thomson Reuters poll of six brokers expects Supermax to post a full-year net profit of MYR86 million.

   Thai said demand for gloves, which exceeds the existing supply, remains "very strong" and show no signs of abating. The company sold 18% more gloves in the first half of 2009 compared with the same period a year earlier, with sales coming in at 6.0 billion gloves compared with 5.1 billion gloves previously.

   "Since March, we have seen a steady increase in demand. In addition, with the global outbreak of swine flu in April, the demand especially from the healthcare and hygiene sectors has quadrupled," he said.

   Current demand conditions favor companies with higher production capacities, Thai said. "As Supermax is the second largest glove manufacturer in Malaysia in terms of production capacity and in terms of the global market share, (we are) reaping benefits from the strong demand and huge surge in orders," he said.

   Thai said the company is ramping up production capacity at every one of its eight manufacturing plants, minimizing unscheduled production downtime and expediting the upgrading of the older production lines at one of the plants.

   "In addition, we would also be fast tracking the installation of 12 new production lines which would help to ease the burden, reduce the delivery lead time and reduce back orders," he said.

   Thai said the company will focus on organic growth rather than via acquisitions. "We will focus 100% on the development and expansion of glove capacity via our GloveCity Project," he said. Supermax had earlier said that it plans to build six large manufacturing plants, at a cost of between MYR40 million and MYR50 million each, on a 36.8 acre land near Kuala Lumpur.

   The plants that will be built starting 2011 will raise capacity by some 18 billion pieces of gloves per year capacity to its existing capacity of 14.5 billion pieces.

   Thai said, in the meantime, demand was not fully met by supply, with some customers willing to pay incentives to manufacturers for fast tracking the delivery of their orders. He declined to provide details of plans to raise prices, but said that "glove prices are adjusted regularly according to the price of latex raw materials and foreign exchange."

   Rubber glove prices have moved up by between 8% and 15% since the outbreak of swine flu, according to Malaysian Rubber Gloves Manufacturer's Association president K.M. Lee.

   Some 43% of the company's sales are to the North American market, where the company is currently the third biggest glove brand in the US dental market, supplying more than 7% of the market in the first quarter of 2009, according to industry data. Europe, accounting for some 27% sales, is the company's second largest market.

   Malaysia, the world's largest manufacturer and exporter of rubber gloves, ships more than 40 billion pairs of rubber gloves annually and has a 65% market share in the world.

      - By K.P. Lee ; Dow Jones Newswires; (603) 2026 1233;