Aspen Glove, the subsidiary of Aspen Group, has entered into a sales and distribution agreement with an unnamed third-party distributor on Jan 13.
Under the agreement, Aspen Glove will supply its entire 2021 production to the distributor, which is estimated to be around 1 billion pieces of nitrile medical grade examination gloves, as well as natural rubber medical grade examination gloves.
The gloves will be produced from May 1 to Dec 31.
Through the agreement, Aspen Glove has secured US$100 million ($132.8 million) in sales value, assuming that the average selling price (ASP) is about US$100 per a thousand pieces of gloves.
The consideration for each batch will be paid in two tranches.
A 30% deposit is required two months before shipment, whereas the remaining 70% will be paid upon the readiness of the gloves before shipment.
Following the agreement, the distributor has since paid Aspen Glove a deposit of US$2 million, or 2% of the value of the secured sales.
The agreement is for the gloves produced in 2021 only, and is renewable after, upon mutual agreement.
The gloves will be distributed on an original equipment manufacturing (OEM) basis to the European and US markets. The required licenses for the sale and distribution of such gloves have been obtained.
“The sales and distribution arrangement will allow Aspen Gloves to penetrate the European and US markets which are our target markets and capture the market demand for medical grade examination gloves. From here, we are also able to expand our customer base globally,” says M. Murly, Aspen Group’s president and group CEO.
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Murly adds that the agreement now “relieves us of the need to manage sales and negotiate with various parties”, which means that the company can now focus its efforts on accelerating its expansion plans.
" We can now focus our efforts on accelerating our expansion plans under Phase 1b to include an additional six lines, which production is now expected to commence progressively from 3QFY2021 onwards and to also bring forward Phase 2 for another 12 lines, to commence progressively from 2QFY2022 onwards,” says Murly.
“With this sales of US$100 million and acceleration of the additional 18 lines in 2021 and 2022, Aspen Gloves is expected to contribute significantly to the growth in revenue and profit of the Group for the financial year ending Dec 31,” he adds.
As at Jan 12, Aspen Gloves has completed the superstructure for the production building of the manufacturing facility and the glove dipping line machineries are being constructed on site.
The construction of the facility is expected to be completed by March 31. The production trial is expected to begin from April 1.
Full operations are expected to begin on May 1, and the first shipment is estimated to be completed within the same month.
Aspen says it expects work to go on as scheduled during the Movement Control Order (MCO) from Jan 13 to Jan 26, and during the state of emergency.
The glove manufacturing industry is deemed as part of the essential services allowed to operate during the MCO.
As at 12.39pm, shares in Aspen are trading 3 cents higher or 12.5% up at 27 cents. The group requested for a trading halt at 7.32am on Jan 12, and requested for the halt to be lifted at 11.32am on the same day.
