Disposable gloves manufacturer UG Healthcare registered 61.3% y-o-y lower earnings of $21.2 million for the 1HFY2022 ended Dec 31, 2021.
Earnings per share for the period stood at 3.45 cents from 9.05 cents from the same period the year before.
Revenue, too, fell 26.4% y-o-y to $117.3 million for the period.
No dividend has been declared or recommended for 1HFY2022 as the group wishes to conserve cash for expansion and growth, reads a Feb 11 press release.
Steady decline in average selling prices (ASP) across all product segments resulted in lower gross margins as market supply of disposable examination gloves increased and most countries gradually returned to normality, says the company.
In addition, the temporary closure and the mandated 60% workforce capacity at the group’s upstream manufacturing operations in Malaysia, as well as customers’ preference to hold lower inventory during the period under review, had also contributed to the group’s weaker financial performance in 1HFY2022, adds the company.
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Operating expenses remained stable. It recorded a decrease of 3.2% y-o-y to $16.5 million in 1HFY2022. Finance cost increased by $51,000 to $0.43 million in 1HFY2022 due to an increase in long-term borrowings for construction of the new factory and new production lines.
Gross profit decreased by 55.1% y-o-y to $44.6 million. This was mainly due to the lower ASP of products and higher fixed overheads with the increase in production capacity in the period.
Correspondingly, gross profit margin declined to 38.0% from 62.2% this time last year. Other income remained relatively stable at $0.2 million in both 1HFY2022 and 1HFY2021 and total operating expenses, comprising marketing and distribution expenses and administrative expenses, decreased marginally to $16.5 million from $17.1 million this time last year.
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Other expenses, arising mainly from the loss from foreign exchange, decreased to $1.3 million from $1.7 million this time last year. The loss was due to the volatility of the functional currencies of the group’s distribution subsidiaries, namely the Brazilian real, renminbi and the British pound against the US dollar.
After taking into account tax expenses and minority interests, the group’s net profit attributable to shareholders declined to $21.2 million from $54.9 million this time last year.
Net asset value (NAV) attributable to the owners of the Company increased to $210.6 million from $190.6 million this time last year. Correspondingly, net asset value per share increased to 33.76 Singapore cents from 30.93 Singapore cents.
The group’s current production capacity stands at 3.4 billion pieces of gloves per year. The group’s new factory has been delayed due to the temporary shutdown of construction activities in Malaysia between June and September 2021. As a result, the date of commencement of the new capacity has been delayed to May 2022.
This additional capacity will bring the group’s total installed capacity to 4.6 billion pieces of gloves per year.
Lee Jun Yih, executive director and finance director of UG Healthcare, says: “Despite intense competition and lower ASP, the group remains confident to achieve better financial performance compared to pre-Covid-19 times as heightened hygiene awareness is likely to continue to drive demand for disposable gloves.”
Lee continues: “While our proprietary branded disposable examination gloves remain as our mainstay products, we are mindful of the evolving business situation and will be prudent regarding any further expansion of production capacity beyond 4.6 billion pieces of gloves per annum.”
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“We will, however, continue to seek diversification in non-glove business opportunities in the healthcare related sector, tapping on our entrenched downstream distribution infrastructure and capabilities to broaden our product portfolio as well as our earnings base,” he adds.
Shares in UG Healthcare closed 0.5 cents lower, or 1.72% down, at 28.5 cents.
Photo: UG Healthcare
