by Justin Yap. Posted on November 11, 2010, Thursday
Company to focus on premium segments to cope with temporary headwinds
HIGH-TECH PRODUCTION: Photo shows a Latexx employee working with an incubator machine.
KUCHING: Latexx Partners Bhd’s (Latexx) ability to pass on costs to customers, coupled with its strategies to focus on the premium segments has enabled it to cope with the temporary headwinds and move on to advance its market presence.
Latexx announced results for the third quarter ended September 30, 2010 (3Q10) yesterday. The group recorded revenue of RM129.88 million for 3Q10, a 60.7 per cent growth from the same quarter a year ago (3Q09). For the current quarter, the group achieved net profit of RM17.63 million.
For the current year to date, the group sales revenue for the nine months ended September 30, 2010 increased 73.1 per cent to RM390.53 million from RM225.59 million for the corresponding period last year.
“The significant increase in revenue and improve-ment in the net profit of the current year was mainly due to the increase in overall sales volume, driven by the strong demand of gloves and the group’s capacity expansion,” said its chief executive officer (CEO) and chairman Low Bok Tek when contacted by The Borneo Post.
“The stronger performance was also attributed by measures taken to improve the efficiency in operation control as well as the intensified and aggressive marketing strategy,” he added.
The balance sheet position of the group continued to strengthen in 3Q10 compared with the preceding quarter. The net cash flow from operating activities as at September 30, 2010 was RM55.6 million, 30.8 per cent higher than the previous quarter of RM42.5 million.
When asked on the market glove demand, Low explained, “It had remained healthy although the concern for H1N1 had faded. Upon normalising, the demand for gloves still grew at 10 per cent to 12 per cent annually, which indicates a remarkable upside for any industry.
“Over the years, growing hygiene awareness and increased healthcare spending have made gloves a necessity in the healthcare sector, especially, in developed economies, thus making the industry resilient even when economy is slowing down.”
Looking at its strategic market positioning with thin nitrile gloves in the non-medical sector, Latexx head of corporate services Dr Liew Lai Lai said, “The sustained high level of latex prices is still the biggest challenge faced by all glove makers. Keeping abreast with the changing industry landscape, we have since adopted a few contingency strategies to adapt itself to the environment.
“Besides continuing to place more focus on the premium product segment that is relatively more resilient, we have also started offering a range of thinner, good quality and more price competitive nitrile gloves to both the medical and non-medical sector.”
Currently, almost 90 per cent of the group’s sales were to the medical sector; hence, the group was aiming to enlarge its revenue base by venturing into the non-medical sector. Latexx projected its range of thin and value priced nitrile gloves would be able to effectively substitute the lower-end natural rubber (NR) powdered gloves in the food and industrial market segment.
Latexx further foresaw that the latex price in the future would be lingering on the increasing trend and it believed that the sales of its range of thin nitrile gloves would increase substantially and significantly boost the revenue and profitability of the group by 2011.
The company also has strategically positioned itself in the premium NR gloves segment, with the launching of the first-in-the world NR powder-free gloves with unquantifiable protein level.
“This premium product range is currently the most effective solution to the threats of protein allergy for glove users,” said Liew.
“Based on the initial market response that we managed to obtain at this stage, the market is responding well and we strongly believes that these value-added natural latex gloves are able to create a demand and be widely accepted by the market and industry globally,” added Low.
He also revealed that the construction of an additional production plant adjacent to existing production facilities had been completed. The commissioning of glove production lines was done in accordance to schedule.
“Nine double formers and two single formers glove production lines were commissioned and have since started operation. The commissioning of the remaining glove production lines is in progress and is expected to increase the total capacity to nine billion pieces per annum by next year,” said the chairman.
The group continued to see a strong performance in its business for the remaining quarter of the year. “The board of directors expects the demand for the products and services to improve further in the fourth quarter and the business to remain strong until end of the financial year,” Liew concluded.
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