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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 (loss)/ gain on derivatives have been included in other operating (expenses) /income

Balance Sheet

Review Of Performance

Income Statement Review

For 2Q2017, the Group achieved RM213.2 million in total revenue, a 36.1% increase as compared to RM156.7 million in 2Q2016. With the increase in total revenue, the cost of sales had increased to RM169.6 million in 2Q2017. The Group's gross profit rose 14.1% from RM38.2 million in 2Q2016 to RM43.7 million in 2Q2017. The Group's gross profit margin came down from 24.4% to 20.5% due to higher production costs especially in raw material.

The Group's other income increased to RM0.9 million in 2Q2017 mainly due to higher interest income.

Selling and distribution expenses and general and administrative expenses were flat at RM3.5 million and RM5.5 million respectively in 2Q2017.

Other operating expenses was at RM3.5 million in 2Q2017 as compared to other operating income of RM2.1 million in 2Q2016. The increase in other operating expenses were mainly due to the increase in net foreign exchange loss, fair value loss in derivatives and research and development expenses.

The Group's effective tax rate was at 14.5% due to avalability of tax incentive. Income tax expenses increased slightly to RM4.6 million as a result of higher taxable income.

Overall for the 2Q2017, the Group's profit before tax and profit after tax were at RM31.7 million and RM27.1 million respectively.

Balance Sheet Review

As at 30 June 2017, non-current assets which consist of Property, plant and equipment (PPE) and deferred tax asset, increased to RM386.7 million from RM345.2 million. PPE increased to RM377.6 million from RM336.7 million mainly on acquisition amounted to RM58.2 million offset by the depreciation charge and PPE written off/ disposal of RM16.6 million and RM0.7 million respectively. The deferred tax asset increased to RM9.1 million mainly due to the availability of reinvestment allowances.

Inventories decreased to RM63.6 million as at 30 June 2017 from RM67.0 million as at 31 December 2016 mainly due to increase in sales. Improvement in trade receivables turnover led the trade receivables declined to RM136.5 million. As a results of refunds from Goods and services tax, other receivables reduced to RM9.0 million as at 30 June 2017 from RM9.2 million. On the other hand, Prepayments increased from RM1.7 million to RM2.4 million as at 30 June 2017 mainly due to prepayment of Malaysian government levy for foreign workers.

Cash and cash equivalents increased to RM113.3 million as at 30 June 2017 from RM103.2 million as at 31 December 2016. For the 2Q2017, the Group generated RM37.6 million in net cash flows from operating activities and net cash flows used in investing activities amounted to RM34.9 million were mainly for the purchase of PPE. The Group has net cash flows used in financing activities in 2Q2017 amounted to RM40.0 million for the payment of dividends and repayment of bank borrowings.

Current liabilities increased to RM100.5 million as at 30 June 2017 from RM100.4 million as at 31 December 2016. This mainly due to lower payables and accruals from RM90.5 million as at 31 December 2016 to RM88.1 million as at 30 June 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 RM0.1 million. Provision for taxation was RM6.4 million as at 30 June 2017, increased from RM5.3 million as at 31 December 2016.

Non-current liabilities increased to RM35.1 million as at 30 June 2017 from RM12.7 million due to bank borrowings of RM22.0 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 is still on track for the phase 5 expansion which will add 1.4 billion gloves and the total annual production capacity of 9.0 billion gloves by the end of December 2018. With the undertaking of phase 6 expansion plan, our total annual production capacity will then reach 10.4 billion gloves by the end of December 2019. 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.