PETALING JAYA: Rubber glove(from: http://www.industry-raw-materials.com/buy-Rubber_glove/) manufacturers are expected to deliver a fairly bouncy growth for the June quarter in spite of record latex and synthetic rubber prices.
Although they would still show earnings growth, profit margins probably declined due to the high raw material prices. In other words, they did not come through totally unscathed.
The relative resilience of this performance testifies to the capability and focus of management in an industry in which the large plantation groups had tried to diversify into and failed.
The first in the industry to announce in the current results season, Hartalega Holdings Bhd told Bursa Malaysia on Monday it made a net profit of RM12.9mil in its second quarter ended June 30.
The group’s pre-tax profit amounted to RM14.8mil compared with RM10.5mil in the preceding quarter that was affected by about RM1.5mil for equipment(from: http://www.industry-raw-materials.com/buy-equipment/) and inventories damaged by fire.
Interestingly, Hartalega maintained its net profit margin of 14.6% inthe second quarter, the highest in the industry.
This could be an exception in the industry, with the other players likely to report a compression in profit margins.
A Top Glove Corp Bhd director, for instance, made some comments in a newspaper earlier this month that was interpreted as a “profit warning.” He indicated the company was unlikely meet its management target of a net profit of RM125mil for the year ending Aug 31, 2008.
Top Glove had already experienced a margin squeeze in its third quarter ended May 31 due to the appreciation of the ringgit at that time and as a result, reported flattish earnings.
The company had been examplary in the transparency of its management targets although the latest “profit warning” was not widely disseminated as is the practice in the developed capital markets.
In contrast to the headwinds of ringgit appreciation and rise in raw material costs in the first half year, glove manufacturers will find some relief in the current quarter ending September as latex prices have declined 5% from RM6.24 per kg on Aug 1 to RM5.92 yesterday.
On the flip side, however, they have to contend with higher costs of energy - gas(from: http://www.industry-raw-materials.com/buy-energy_%255E%2520gas/), electricity, diesel and petrol, with the latter raising transport costs.
It was therefore a relief that the Government revised its decision for a sudden surge in the prices for natural gas, and amended that to a more moderate increase to be followed by gradual increases staggered over the next 13 years.
Together, Malaysian rubber glove manufacturers are the world’s leading exporters, with the biggest market share by country. They are competitive but not invincible.
They therefore could use with aid from the Government, where appropriate, and could do without disruptive new regulations.
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