First of all, as I write this in the midst of the COVID-19 pandemic, I wish that you and your families are safe and well.
Financial year 2019 was a stabilizing year for the Group in which we closed the deal on the disposal of our China operations and focused our resources on home soil, particularly in the nitrile disposable glove division. While rising material and labour costs remain core concerns of any manufacturer, the weakened Ringgit during the year helped cushioned some of the impact to Rubberex Group as a net exporter.
Overview of Performance
In the financial year just ended, the Group recorded a pretax profit of RM15.7 million on the back of RM218.6 million in revenue through the sales of generalpurpose, industrial and disposable gloves to markets and customers mainly in Europe, the Americas and Asia. Profits after tax rose to RM11.4 million, a 31.0% increase from RM8.7 million of the previous year. We were encouraged by the consistently strong demand of gloves, more so at this critical period where health, safety and precautionary measures are paramount.
The successful sale and de-consolidation of our China plants had benefited the Group in terms of a stronger cashflow position and gains recognized in profit or loss upon completion of the disposal exercise in the third quarter of 2019. From provisional losses of RM60.8 million in 2018, the Group records positive net gains of RM15.2 million from this division. On the whole, overall profits attributable to shareholders amounted to RM26.5 million at the close of financial year 2019, a vast improvement from the loss of RM52.1 million previously.
The disposal of our China operations during the year netted the Group approximately RM65.5 million in positive cashflow. Proceeds from the disposal were utilized for the retirement of term loans amounting to RM27.0 million and part financed our nitrile disposable glove plant expansion. Excess funds had also been placed in fixed deposit accounts as at the close of the year.
No other new corporate development is envisioned for the Group other than the keen focus on the commissioning of our latest phase of nitrile disposable glove expansion which is expected to come on-stream by the third quarter of 2020, of which time we would have on hand an installed production capacity of 2.5 billion pieces per annum.
Two single-tier interim dividends of 1.0 sen each, amounting to total 2.0 sen per ordinary share held, or RM5.0 million in total were paid to our esteemed shareholders on 18 September 2019 and 20 January 2020 respectively, in respect of the financial year just ended. The Board will continue with its policy of paying dividends as long as Group performance and cashflows are satisfactory.
According to the Malaysian Rubber Export Promotion Council (MREPC), Malaysia’s export of rubber products was valued at RM23.3 billion in 2019, and latex goods accounted for 81%; Malaysia remains the world’s leading supplier of gloves, supplying more than 50% of global demand (Source: www.mrepc. com/industry.malaysia_export.php).
Even prior to the coronavirus outbreak that saw a rapid surge in demand for gloves and other safety devices, global consumption of gloves is generally on the rise with heightened self-protection awareness, improved hygiene and rising living standards among the population. Other than household and industrial glove applications, demand for our nitrile disposable gloves has been encouragingly strong and the Group sees sustainable growth potential in this division.
Plans are already in the pipeline for further investments within the next three years that would double our annual production capacity up to 5.0 billion pieces of disposable gloves by year 2023, with a conservative 25% annual growth rate projection. Capitalizing on our solid customer base and strong track record in the glove business, Rubberex envisions to become a more significant glove player, on par with several of its peers in the industry.
Notwithstanding this optimism, we are also mindful of the inherent challenges for the Group in the year ahead such as the volatility of foreign exchange rates, uncertainty in crude oil prices as well as the rate of recovery of our local and global economies when this pandemic ends.
Appreciation and acknowledgment
On behalf of the Board, I wish to express our sincere appreciation to the management and staff of the Group for their commitment, hard work and loyalty. We would also like to thank the Malaysian government, the relevant authorities, our customers, shareholders, bankers, advisors and business associates for their valued support and assistance.
As we weather this global COVID-19 storm together, the Board and Management also extend our heartfelt appreciation to the medical professionals, healthcare providers, governmental authorities, volunteers and experts in the field for their dedicated services to our nation at this challenging unprecedented time.
Dato’ Abd Rahim bin Abd Halim
30 March 2020