By Gho Chee Yuan
KUALA LUMPUR (Jul 11) -- Malaysian glove maker Careplus Group plans to spend 30 million ringgit ($6.98 million) annually for the next four years to nearly triple its production capacity to meet growing demand, its chief executive said.
Careplus aims to produce up to 10 billion pieces of gloves a year in four years from the current capacity of 3.9 billion pieces a year, Lim Kwee Shyan told Nikkei Markets. The company's three factories in Malaysia will likely manufacture up to 4.20 billion pieces by year end, he said.
"We intend to fund the expansion via internal generated funds or bank borrowings," Lim said. The company could also issue new shares up to 10% of its equity capital to raise cash through private placement if additional funding is needed, he said.
Careplus' planned expansion is in lockstep with the industry's rapid capacity growth to meet global demand that Malaysian Rubber Glove Manufacturers Association estimates will grow by up to 10% annually.
Malaysia is home to the world's largest producers that collectively supply more than half of the world's natural rubber and synthetic gloves. Careplus' largest rival Top Glove Corp produces 48 billion pieces of gloves annually and is raising capacity to as much as 59.7 billion pieces of gloves a year by end of 2018.
"There is a concern that small players like Careplus could easily fall into the red or show inconsistencies in its bottom line," AmInvestment Bank said in a note to investors. "Nevertheless, the glove industry is a volume game and capacity building is inevitable for survival."
Careplus is aiming for a revenue of 300 million ringgit this year and targeting to hold the margin steady at around 10%, said Lim. "We are optimistic in achieving higher sales this year with higher utilization of the installed capacity," he added.
Sales to Central America and South America, which accounts for nearly 70% of its revenue, will likely remain strong this year, Lim said.
Shares of Careplus, which have gained 58.8% this year, are unchanged at 0.405 ringgit apiece.
- By Gho Chee Yuan; firstname.lastname@example.org; +603-202673363
- Edited By Abhrajit Gangopadhyay
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