MY !

' #

Vaccination Tracker

48.55M Doses administered

MORE DETAILS "

TRENDING NOW BNM Financial Stability Review

MALAYSIA CORPORATE TOP STORIES Select Language ​ ▼

Highlight

US import ban expected to have

significant impact on Supermax's
earnings, say analysts
Tan Siew Mung / theedgemarkets.com
October 21, 2021 15:40 pm +08

KUALA LUMPUR (Oct 21): The US Customs and Border Protection's

(CBP) move to ban imports from glove maker Supermax Corp Bhd
over alleged forced labour at the company is expected to have a
signi!cant impact on its earnings, said analysts on Thursday (Oct 21).

“The US historically contributes around 20% to 30% of its earnings.

So, we expect a signi!cant impact on its earnings, considering gloves
command premium pricing in the US compared to other countries,”
KAF Research analyst Nabil Zainoodin told The Edge.

According to him, the impact also depends on how long it takes for
Supermax to resolve the issue.

Sponsored Content

Benefiting from opportunities in cryptocurrency

investments
Cryptocurrencies have been in the spotlight over the past few months, with many
coins reportedly at all-time highs. As of October 12, cryptocurrencies had a market
capitalization of about $2.3 trillion, according to data provided by CoinGecko,
which tracks 9,653 coins.

READ MORE

“Note that it took almost a year for Top Glove Corp Bhd to be cleared
of the ban,” he added.

He also expects signi!cant operating margin reversal in the

forthcoming quarters as average selling prices (ASPs) of gloves will
be contracting faster than expected in the face of enlarged capacity.

“Note that Supermax's expansion plan is still ongoing in a big way

with !ve glove manufacturing plants currently under construction,”
he said.

According to Supermax's latest !nancial results and bourse !ling,

the group completed the commissioning of the remaining
production lines in Block B of Plant 12 in the last quarter of 2020
(4Q20), adding 2.2 billion gloves to the group’s annual installed
capacity. The group has seen full-quarter contributions since 1Q21.

The company is currently building the !ve glove manufacturing

plants concurrently, which are scheduled for completion
progressively. The new plants will add 22.25 billion pieces of gloves
in new capacity, bringing the group’s total capacity to 48.42 billion
gloves when they are fully commissioned. Supermax would invest a
total capital expenditure of RM1.39 billion in the new plants.

Meanwhile, an analyst who declined to be named said the US import

ban may reduce the company's earnings by 15% for the !nancial year
ending June 30, 2022 (FY22) as the US accounts for 50% of its sales.

As Top Glove took more than one year to lift the ban, he expects
Supermax to probably take at least one year to resume exports to the
US.

He opined that Supermax will immediately hire an auditor to go

through the audit process and assess the damage from the impact of
the ban.

However, he noted that the earnings impact will also depend on

Supermax’s strategies.

“If the group decides to dump its gloves (like what Top Glove did
when facing the import ban by the US), the earnings impact may be
less,” he said.

He does not rule out the possibility of Supermax dumping gloves as

the company logged in high prices in 4Q20.

“If the company dumps its gloves, glove ASPs, which were falling by
8% to 10% in October to December, will likely decline faster,” he said.

Fortress Capital Asset Management chief executive o"cer Thomas

Yong also opined that the immediate impact of the CBP import ban
on Supermax’s earnings is quite negative as about one-third of its
earnings come from the US market, which usually can provide a
higher selling price compared to other markets.

“The recovery pace would depend on how fast the company can
rectify the ban as well as its ability to look for markets elsewhere,” he
told The Edge.

He also said demand for gloves is already slowing down with the
covid-19 vaccination rate rising globally, and the urgency of a big
market player to sell its gloves in a relatively short period of time
would intensify the competition as large players would strive to
maintain their market share.

“Furthermore, players selling outside the US might face sti#

competition from Chinese companies as they are ramping up
capacity aggressively. All these potential developments are
suggesting that a decline in selling prices will be inevitable,” he
added.

In a press release on Thursday, the CBP said its o"cers at all US

ports of entry will detain disposable gloves produced by Supermax’s
wholly-owned subsidiaries Maxter Glove Manufacturing Sdn Bhd,
Maxwell Glove Manufacturing Bhd and Supermax Glove
Manufacturing.

“With 10 of the 11 forced labour indicators identi!ed during the

course of our investigation, the CBP has su"cient evidence to
conclude that Supermax and its subsidiaries produce gloves in
violation of US trade law,” said CBP O"ce of Trade executive
assistant commissioner AnnMarie R Highsmith.

At the time of writing on Thursday, Supermax founder Datuk Seri

Stanley Thai Kim Sim had not responded to questions sent by The
Edge.

The share price of Supermax fell as much as 25 sen or 12.5% to a 17-

month low of RM2. At 3.10pm, the counter had pared some losses at
RM2.02, still down 23 sen or 10.22%. It was the eighth top loser on
Bursa Malaysia, and the most actively traded stock on
Thursday morning with 59.77 million shares done.

Read also:
US Customs issues seize order on Supermax products on forced
labour !nding
Supermax plunges as US Customs issues seize order on forced
labour allegations

Edited by Lam Jian Wyn

Sponsored Content

Redefining La Dolce Vita

Sleek, sexy and the ultimate status symbol, Ferraris have long been coveted — and
with good reason. But beyond the power, performance and pure driving pleasure
that an automobile bearing the inimitable prancing horse insignia a#ords, Enzo
Ferrari’s eponymous maison has come to stand as a paragon of sheer automotive
perfection.

READ MORE

Subscribe to Mid-day
email alert

We deliver news to your

inbox daily

Email Address

S UB S C R I B E

FEATURED VIDEOS

& &
21 Oct 2021 | 06:30am % Morning Call, F… 20 Oct 2021 | 09:52pm % Evening 5, Fea…

MORNING CALL: 21/10/21 EVENING 5: 1MDB report the only one

requested by Najib

! " #

$ MOST READ

MOST WATCHED

1
US Customs issues seize
order on Supermax
products on forced
labour finding

2
'They'll have to pay',
Malaysia's chip crunch
triggers new era in
supply deals

3
EPF’s 1H performance
points to higher 2021
dividend

4
Supermax plunges as US
Customs issues seize
order on forced labour
allegations

5
MoH ramping up
surveillance as Klang
Valley and Sarawak
hospital admissions
increased in last seven
days, says Khairy

Branded Content

MALAYSIAN-MADE FACE MASK Back to School, Not Ba

BRAND - EMPRO TO INCREASE
PRODUCTION RATES AFTER BEING
THE FIRST IN...

Sale Sale
BBaanndda arr
PPuutteerrii
PPuucchho onng g U
USSJJ

Rent Rent

TTa
amma an
nU U-- MMuuttiia
arra
a
TTh
haan
ntt D
Daammaan nssa
arra
a

Sale Sale

KKo
otta
a M
Mo onntt
D
Daam
ma annssa
arra
a KKiia
arra
a

Sale Sale

SShhaah
h BBu
ukkiitt
AAlla
amm JJeellu
utto
on ngg

Rent Sale Rent Sale Sale

TTa am
maan n
TTu un
nDDrr D
Deenna
aii
JJa
alla
ann IIp
pooh
h U
USSJJ IIssm
maaiill A
Alla
amm KKLLC
CCC

Rent Rent Sale Rent Sale

BBa
anndda
arr
BBu
ukkiitt M
Mo onntt PPu
unncca
akk KKo
otta
a
BBiin
ntta
an ng g KKiia
arra
a A
Alla
amm A
Ammp
paan
ngg KKeem
mu unniin
ngg

Selangor

Bedrooms Budget

Buy Rent Search

NEWS
US contributes additional
US$800,000 to Malaysia in
Covid-19 vaccination…
efforts
NEWS
High Court allows
prosecution to start
impeachment bid on…
Rosmah
NEWS

Home About Us Join Us Contact Us Advertise with us Subscription

Sitemap Term of use PDPA

Copyright © 1999-2021 The Edge Communications Sdn. Bhd. All rights reserved.