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UNAUDITED RESULTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2017

Financials Archive

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Income Statement

Consolidated Statement of Comprehensive Income

N/M Not Meaningful
* Denote amount less than RM500
# The net foreign exchange (loss)/gain and fair value gain/ (loss) on derivatives have been included in other operating expenses

A Statement of financial Position

Review Of Performance

Income Statement Review

For 3Q2017, the Group achieved RM187.8 million in total revenue, a 12.5% increase as compared to RM167.0 million in 3Q2016. With the increase in total revenue, the cost of sales had increased to RM137.0 million in 3Q2017. The Group's gross profit rose 16.7% from RM43.6 million in 3Q2016 to RM50.8 million in 3Q2017.

The Group's other income increased to RM0.7 million in 3Q2017 mainly due to higher interest income.

Selling and distribution expenses decreased by RM0.4 million year-on-year (yoy) to RM3.6 million in 3Q2017 was mainly due to reduction in marketing expenses.

General and administrative expenses increased by 15.1% to RM6.2 million in 3Q2017 mainly due to increase expenditure in staff benefits.

Other operating expenses was at RM1.7 million in 3Q2017, increased by RM1.2 million yoy. The increase in other operating expenses was mainly due to the impact from net foreign exchange and fair value in derivatives.

The Group's effective tax rate was at 13.4% due to availability of tax incentive. Income tax expenses increased to RM5.3 million as a result of higher taxable income.

Overall yoy in 3Q2017, the Group's profit before tax and profit after tax had double digit growth to record at RM39.7 million and RM34.3 million respectively.

Balance Sheet Review

As at 30 September 2017, non-current assets which consist of Property, plant and equipment (PPE) and deferred tax asset, increased to RM410.3 million from RM345.2 million. PPE increased to RM401.0 million from RM336.7 million mainly on acquisition amounted to RM90.2 million coupled with foreign exchange adjustment of RM0.1 million offset by the depreciation charge and PPE written off/ disposal of RM25.1 million and RM0.9 million respectively. The deferred tax asset increased to RM9.4 million mainly due to the availability of reinvestment allowances.

Inventories increased to RM68.0 million as at 30 September 2017 from RM67.0 million as at 31 December 2016 mainly due to higher production volume. Improvement in trade receivables turnover led the trade receivables declined to RM118.0 million. As a results of refunds from Goods and services tax, other receivables reduced to RM7.9 million as at 30 September 2017 from RM9.2 million. On the other hand, Prepayments increased from RM1.7 million to RM2.4 million as at 30 September 2017 mainly due to prepayment of Malaysian government levy for foreign workers.

Cash and cash equivalents increased to RM138.9 million as at 30 September 2017 from RM103.2 million as at 31 December 2016. For the 3Q2017, the Group generated RM58.8 million in net cash flows from operating activities and net cash flows used in investing activities amounted to RM31.7 million were mainly for the purchase of PPE. The Group has net cash flows used in financing activities in 3Q2017 amounted to RM1.5 million for the repayment of bank borrowings.

Current liabilities increased to RM102.4 million as at 30 September 2017 from RM100.4 million as at 31 December 2016. This mainly due to higher payables and accruals from RM90.5 million as at 31 December 2016 to RM91.6 million as at 30 September 2017 coupled with bank borrowings of RM6.0 million and offset by a reduction of derivatives (liabilities) at RM4.6 million to derivatives (assets) at RM1.1 million. Provision for taxation was RM4.8 million as at 30 September 2017, increased from RM5.3 million as at 31 December 2016.

Non-current liabilities increased to RM33.9 million as at 30 September 2017 from RM12.7 million due to bank borrowings of RM20.5 million and higher deferred tax liabilities.

Commentary On Current Year Prospects

Our Group's phase 4 expansion plan in Taiping, Perak, Malaysia has progressed well. By the end of December 2017, our Group will have a total annual production capacity of 7.6 billion gloves.

The Group has announced on the undertaking of phase 5 expansion plan which will add 1.4 billion gloves bringing the total annual production capacity to 9.0 billion gloves by the end of December 2018. In addition, the Group has plans to add another 1.4 billion pieces of gloves by the end of 2019 as Phase 6, giving the Group a total annual production capacity of 10.4 billion pieces of gloves. Further details will be announced in due course.

The volatility in raw material prices, increase in overall production costs and competition from the other glove manufacturers remain challenging for the Group.