VIP Gloves capitalises on soaring demand for PPE equipment
Health & Biotech
Health & Biotech
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Special Report: Medical-grade gloves manufacturer VIP Gloves is experiencing spectacular revenue and margin growth on sustained demand for Personal Protective Equipment (PPE).
Demand for VIP Gloves’ (ASX:VIP) products has accelerated with the COVID-19 pandemic as industry players across the board adhere to stringent new standards for PPE in order to operate safely.
“The gloves industry was already making about 10 per cent growth year on year before the COVID pandemic, but COVID-19 has now propelled revenue through the stratosphere,” said a VIP Gloves company spokesperson.
The company produces medical-standard gloves made from nitrile, a synthetic material.
VIP Gloves’ earnings before interest, taxes, depreciation and amortisation leapt 340 per cent to $4.5m in the September quarter, from $1m in the June quarter.
Average selling prices rose 70 per cent for the September quarter period to an average of $US50 ($71) per 1,000 pairs of gloves.
“As demand increases so will margins on increased production volumes,” said the company spokesperson.
For a small cap company that only entered the gloves manufacturing business several years ago, its results have been outstanding in terms of revenue and profit.
VIP Gloves originally manufactured glove production line parts for glove makers in Malaysia.
Management decided to move into glove production because of its bright prospects.
Export markets in Asia and the Middle East are booming and customers are flocking to the company which is the only ASX-listed pure play glove manufacturer.
Business for VIP Gloves was good before the pandemic came along, with rising demand from a number of sectors including, agriculture, hospitality, electronics, pharmaceuticals and medical.
“The reality of the gloves business is that it is not a pandemic business, it is a PPE business,” said the company spokesperson. “The pandemic will result in the “new normal” for usage of gloves in the future,” he added.
“If you are a worker in the mining industry for example, the requirements of PPE have moved up a notch and will never come back,” the spokesperson elaborated further.
VIP Gloves manufactures top-of-the-range gloves to a quality standard specified by the medical sector.
Significant quantities of the company’s disposable gloves are used by medical professionals.
“A nurse will use an average of 100 pair of nitrile gloves in the course of one shift,” said the company spokesperson.
VIP Gloves also manufacture medical-standard gloves for other client companies that brand the product with their own packaging, providing an additional layer of profit margin.
VIP Gloves’ plant is expanding to meet growing demand
The company’s manufacturing plant in Selangor, Malaysia is booked solidly until the end of 2021, and in July the company added two additional production lines to its plant operation.
VIP Gloves’ current production is 54 million pairs of gloves per month at its highly automated, low-cost plant in Malaysia, a world centre for glove-making.
A plant expansion costing approximately $6.5m will lift its production capacity in excess of 1 billion pieces of gloves per year and is being financed from cash reserves and operational cashflows.
The company is investigating expansion into other growth markets for PPE equipment.
“They are looking to export the European market directly on their own and are currently applying for the necessary licenses to do so,” said the VIP Gloves spokesperson.
“There still a huge discrepancy between China’s glove production vs glove consumption on a per capita basis despite the massive proposed capacity rollouts which would only come on-stream in the next few years. As such, there would be latent supply-gap which would need to be filled in the interim as country requires additional supplies from imports,“ said the VIP Gloves spokesperson.
This article was developed in collaboration with VIP Gloves, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.