Careplus incurs gross loss in 2QFY22 as glove prices get cheaper

KUALA LUMPUR (Aug 25): Careplus Group Bhd registered a net loss of RM35.28 million, or 6.21 sen per share, for the second quarter ended June 30, 2022 (2QFY22) — the third consecutive loss making quarter for the glove maker.

In contrast, Careplus achieved a net profit of RM105.08 million, or 19.1 sen per share, in 2QFY21.

The filing with Bursa Malaysia showed that Careplus’ quarterly revenue shrunk 66% to RM85.45 million, versus RM249.05 million a year ago.

Notably, the glove maker’s quarterly revenue was lower than its cost of sales amounting to RM104.35 million. This resulted in a gross loss of RM18.89 million, compared with a large gross profit of RM129 million in the previous corresponding quarter.

Careplus attributed the sharp drop in performance for the quarter under review to a decline in average selling price (ASP) and lower sales orders from key customers. By comparison, ASP and medical glove demand reached an all-time high in 2QFY21.

Further, the group’s costs of production were adversely impacted by the increase of minimum wage in Malaysia under the gazetted Minimum Wage Order 2022 and increase in natural gas tariffs.

For the first six-month period ended June 30 (1HFY22), Careplus posted a net loss of RM72.97 million versus a net profit of RM228.62 million a year ago. First-half revenue shrank 65.8% to RM167.71 million, from RM490.38 million.

Compared to the immediate preceding quarter, Careplus’ net loss trimmed from RM37.695 in million in 1QFY22, as revenue increased almost 4% from RM82.26 million.

Careplus said its business outlook is challenging, as it navigates through the uncertainty of gloves ASP, rising cost structure and geopolitical tensions.

“Current ASP is depressed by overhang stock held by most buyers. Production will have to be put on hold till these stocks are depleted,” Careplus stressed.

Expanding capacity in tough landscape

Careplus commented that it shall focus its efforts on securing new orders to improve utilisation rates of production lines and place greater emphasis on cost management to ensure that its performance is on the trajectory of improvement.

“In the current quarter, the group has 43 production lines with an annual capacity of 7.62 billion pieces of gloves.

“The group is working closely with regulators to ensure gradual recruitment of new foreign workers by [the] end of 2022, to fulfill existing shortages. The group will proceed to complete the installation of four additional production lines as committed,” it said.

Nonetheless, Careplus remains optimistic of the longer-term prospects of the gloves sector, underpinned by growing demand for gloves post pandemic, as gloves have been proven to be critical medical equipment for contagious disease control.

Barring any unforeseen circumstances, it expects to have 47 production lines in operation with an annual capacity of 8.46 billion pieces of medical and surgical gloves by year end.

At the closing bell on Thursday (Aug 25), Careplus shares rose 4.84% or 1.5 sen to 32.5 sen, giving the glove company a market value of RM186.23 million. The stock has tumbled 68% year-to-date and 81% over the past year.