SINGAPORE (Feb 8): UG Healthcare Corporation, the gloves manufacturer and distributor, recorded a 57.8% decrease in earnings to $1.4 million in 1H17 ended Dec from $3.2 million a year ago, on the back of an unforeseen significant increase in raw materials costs.
Revenue rose 2.7% to $31 million in 1H17 from $30.1 million in 1H16 mainly due to the increase in the volume of gloves produced and sold, but was partially mitigated by the decreased in the average selling price of gloves.
During the six months under review, the cost of raw materials, in particular, the natural latex and nitrile prices had increased significantly, said UG Healthcare.
The significant increase in cost of raw materials was driven by floods in Thailand and shortage in supply, coupled with the increase in gas tariff led to a 15.6% increase in cost of sales to $26.5 million.
This resulted in a 38.3% decrease in gross profit to $4.5 million in 1H17 from $7.2 million in 1H16. Consequently, gross margin reduced to 14.3% in 1H17 from 23.9% in 1H16.
In 1H17, the weaker ringgit against US dollar and an increase in sundry income, which was partially offset by the decrease in unrealised foreign exchange gain, led to an increase of 4.1% in other income to $1 million.
In its outlook, UG Healthcare expects the business environment to remain challenging amid the volatility in the global macroeconomic environment, coupled with fluctuations in commodity prices and currencies.
The group’s planned production capacity increase to 2.4 billion gloves per annum for the FY17 ended June is also on track.
The group has also taken the opportunity to improve the efficiency and productivity of some of the older production lines as the new production lines came on stream progressively in 1H17.
Shares of UG Healthcare closed 1 cent higher at 30 cents.
