Supermax downgraded after RM24mil loss in Q3

Free Malaysia Today

22-05-2025

Year to date, Supermax shares have crashed 43% in tandem with other local glove makers which have also seen similar drops. (Bernama pic)
PETALING JAYA : Supermax Corp Bhd was slapped with downgrades by research houses after posting a larger-than-expected loss in its third quarter ended March 31 (Q3 FY2025).
The glove maker's net loss widened to RM23.81 million from RM686,000 a year ago, its ninth quarterly loss out of its 10 most recent quarters.
The loss was primarily due to higher operating expenses and a RM12.7 million unrealised foreign exchange loss following the depreciation of the US dollar against the ringgit.
For the first nine months of FY2025, it posted a bigger net loss of RM93.36 million from RM47.1 million a year ago, while revenue rose 34.4% to RM627.11 million from RM466.53 million.
The disappointing results announced yesterday spooked investors, with the stock falling as much as 3 sen or 4% to 69.5 sen today, its lowest level in nearly two months. Year to date (YTD), the shares have crashed 43%.
The plunge is of a similar magnitude with other local glove makers such as Top Glove Corp Bhd (-37% YTD) and Kossan Rubber Industries Bhd (-41%), which have been hammered by Chinese rivals flooding the global market to counter the sharp drop in orders from higher US tariffs.
Within Malaysia, glove makers are struggling with high energy costs and labour shortages due to a freeze on foreign worker intake. This puts them at a distinct disadvantage to countries like China, Thailand, Vietnam and Indonesia, which have lower operating costs.
To remain competitive, the local players are focusing on automation, improving efficiency and cutting costs.
RHB Research has downgraded Supermax to a 'sell' from 'neutral', and lowered its target price to 64 sen from 72 sen previously, a 12% downside.
Frontloading effect in US market
In a note today, the research house said it expects Supermax to remain in the red for the subsequent quarter, no thanks to the impact of a weakening greenback coupled with subdued average selling prices (ASPs).
It said higher ASPs were offset by a fall in sales volumes, attributing it to the 'frontloading effect' as Chinese glove makers flooded the US market ahead of the 50% import tariff implementation.
'The group estimates that this inventory stockpiling by US customers will take six to eight months to deplete before the resumption of usual stock replenishment,' it added.
Given the subdued outlook, RHB expects Supermax's upcoming quarterly results to likely be weaker quarter-on-quarter on the back of a sluggish demand outlook, glove makers' inability to raise ASPs, and the effect of a weakening US dollar.
CIMB Securities has also downgraded Supermax to 'hold' from 'buy' and expects sustained losses for at least the next 12 months, amid a tougher operating environment.
It said the group could remain loss-making until its financial year ending June 30, 2026 (FY2026) due to continued start-up losses from its US glove manufacturing plant.
Supermax is the only Malaysian glove company to have set up a manufacturing plant in the US. The facility in Houston, Texas, commenced production in January this year.
To be built over four phases, the plant will have an annual production capacity of 19.2 billion pieces of gloves when fully completed. The current phase one entails capital expenditure of US$350 million (RM1.5 billion).
Supermax was founded by its executive chairman Stanley Thai and his wife Cheryl Tan in 1987. The group produces over 24 billion gloves a year and exports to about 165 countries.