KUALA LUMPUR (Nov 22): Supermax Corp Bhd continued to see sharp contractions in its quarterly profit, as revenue tumbled amid a continued fall in the average selling prices (ASPs) of gloves amid an oversupply situation, while the demand for gloves normalised as the Covid-19 pandemic eased into its endemic phase.

It announced a net profit of RM5.71 million for its first quarter ended Sept 30, 2022 (1QFY23), down 99.1% from RM638.52 million in the previous year's corresponding quarter. The quarterly profit was also 82.7% lower than the RM33.05 million it made in the immediate preceding quarter of 4QFY22.

Revenue dropped about 83% to RM247.96 million from RM1.46 billion in 1QFY22, the glove maker's Bursa Malaysia filing showed. This revenue was also down 17.5% from 4QFY22's RM300.23 million.

Earnings per share fell to 0.21 sen from 24.6 sen a year earlier.

Supermax said ASPs were well off their highs and remained at current low levels in the face of intense competition from Chinese manufacturers, who are undercutting prices in the market to gain market share.

Its sales also continued to be adversely impacted as the Withhold Release Order imposed by the US Customs and Border Protection in October 2021 remained in place, effectively hampering efforts to import new lower-cost shipments to average down inventory costs, it explained.

"Certain Supermax group's overseas distribution units [are] incurring losses as they continue to sell high-priced inventory at today's low market prices," according to the group.

Other factors that led to lower earnings in the quarter under review were increased operating costs (including high gas costs and increase in minimum wages), pre-operating expenses for its new US plant, and the decommissioning of certain older plants which were in the process of rebuilding.

It also noted that 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 glove 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, it said.

"The resulting oversupply 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.

Nonetheless, the glove maker expects to see continued major consolidation in the rubber glove industry as ASPs and demand continue to moderate from the record highs seen at the peak of the Covid-19 pandemic.

"In the foreseeable future, the market will remain weak, [as] competition continues to be intense and profit margins continue to moderate," it added.

Supermax shares settled unchanged at 91 sen on Tuesday (Nov 22), giving the group a market capitalisation of RM2.48 billion. The stock has fallen 36.36% year-to-date, and 48% over the past year.