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UNAUDITED RESULTS FOR THE FIRST QUARTER ENDED 31 MARCH 2018

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 and fair value (loss)/ gain on derivatives have been included in other operating expenses

A statement of financial position

Review Of Performance

Income Statement Review

For 1Q2018, the Group achieved RM209.8 million in total revenue, a 2.0% increase as compared to RM205.7 million in 1Q2017. Cost of sales increased to RM163.0 million in 1Q2018 in line with increase in total revenue. The Group's gross profit declined by 9.5% from RM51.8 million in 1Q2017 to RM46.9 million in 1Q2018. The Group's gross profit margin came down from 25.2% to 22.3% due to adverse foreign exchange conditions which resulted in a lower average selling price in terms of Ringgit Malaysia (RM).

The Group's other income increased to RM1.0 million in 1Q2018 mainly due to higher interest income and insurance claim.

Selling and distribution expenses increased by 2.2% year-on-year (yoy) to RM3.9 million in 1Q2018 mainly due to increase in marketing expenses.

General and administrative expenses decreased by 20.4% to RM5.5 million yoy mainly due to a reduction in performance incentives.

Other operating expenses of RM2.5 million in 1Q2018 increased by 12.9% yoy. The increase was mainly due to the foreign exchange losses and fair value losses on derivatives.

The Group's effective tax rate was at 12.9% due to availability of tax incentives. Income tax expenses decreased to RM4.6 million as a result of lower taxable income.

Overall for the 1Q2018, the Group's profit before tax reduced by 9.0 % to RM35.7 million and profit after tax decreased by 7.6% to RM31.1 million when compared to 1Q2017.

Balance Sheet Review

As at 31 March 2018, non-current assets which consist of Property, plant and equipment (PPE) and deferred tax asset, increased to RM439.1 million from RM429.6 million. PPE increased to RM429.2 million from RM419.8 million mainly on acquisition of RM19.5 million coupled with foreign exchange adjustment of RM0.1 million offset by the depreciation charge and PPE written off/ disposals of RM10.0 million and RM0.1 million respectively. The deferred tax asset increased by RM0.1 million to RM9.9 million mainly due to the availability of reinvestment allowances.

Inventories increased from RM71.1 million to RM76.1 million as at 31 March 2018 mainly due to higher sales volume. Trade receivables reduced by RM13.5 million and other receivables decreased to RM14.5 million as at 31 March 2018 as a result of better collection. Prepayments increased from RM2.4 million to RM4.3 million as at 31 March 2018 mainly due to prepayment of Malaysian government levy for foreign workers.

Cash and cash equivalents increased to RM135.1 million as at 31 March 2018 from RM114.3 million as at 31 December 2017. For the 1Q2018, the Group generated RM43.5 million in net cash flows from operating activities and net cash flows used in investing activities amounting to RM19.5 million were mainly for the purchase of PPE. The Group has net cash flows used in financing activities in 1Q2018 amounting to RM1.5 million for the repayment of bank borrowings.

Current liabilities reduced to RM109.4 million as at 31 March 2018 from RM115.5 million as at 31 December 2017. This was mainly due to lower payables and accruals from RM101.6 million as at 31 December 2017 to RM94.4 million as at 31 March 2018. Provision for taxation was RM9.0 million as at 31 March 2018, increased from RM7.9 million as at 31 December 2017.

Non-current liabilities declined to RM29.0 million as at 31 March 2018 from RM30.3 million due mainly to a reduction in bank borrowings of RM1.5 million.

Commentary

Phase 5 expansion plan is progressively being carried out in Taiping, Perak, Malaysia. By the end of December 2018 our Group will have a total annual production capacity of 9.0 billion gloves.

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 foreign currency fluctuations particularly in US Dollars, volatile raw material prices, increase in overall production costs and competition from the other glove manufacturers remain challenging for the Group.