Just over a year ago, I did a deep dive into UG Healthcare Corporation Limited (“UG Healthcare”) (SGX:8K7). Like most disposable glove manufacturers, UG Healthcare had a stellar year as Covid-19 resulted in a sharp spike in demand for gloves, precipitating severe industry shortages. 

Fast forward to today, UG Healthcare has recently announced its results for the financial year ended 30 June 2021. In this article, we will delve into the group’s latest earnings to check on its recent business performance. 

1. Surge in revenue and earnings 

In its latest FY2021 ended June, the group saw record earnings of S$118.8 million, a significant increase from S$13.4 million achieved in FY2020. Similarly, revenue surged to S$338.4 million from S$144.2 million. 

The significant increase in both revenue and net profit were attributable to the increase in the volume of glove products produced and sold which was contributed by the higher production capacity, and the relatively favourable average selling prices (ASP) of gloves which were underpinned by the Covid-19 pandemic.

As a result of the above, revenue for latex examination gloves, nitrile gloves and other ancillary products have increased by 97.2%, 193.2% and 57.1% respectively in FY2021 as compared to FY2020.

(Source: FY2021 results)

2. Continued expansion of upstream manufacturing capacity and downstream distribution network

The group’s capacity expansion of 500 million pieces of gloves has allowed it to achieve a production capacity of 3.4 billion pieces of gloves per annum for FY2021. The increase in economies of scale allowed UG Healthcare to grow its market share in all its key markets, particularly the emerging markets of Brazil, China and Nigeria. In fact, the group achieved over 100% revenue growth in sales to Europe, Africa and Asia. 


(Source: FY2021 results)

3. Final dividend of 0.406 Singapore cents per share and a special dividend of 0.100 Singapore cents per share

The board has proposed a final dividend of 0.406 Singapore cents per share and a special dividend of 0.100 Singapore cents per share, which together with the special interim dividend of 0.105 Singapore cents per share paid in March 2021, brings the total dividend for FY2021 to 0.611 Singapore cents per share. This is more than double of 0.238 cents per share paid out in dividends last year. 

Shareholders will have the option of receiving the final dividend of 0.406 Singapore cents per share in scrip or cash. The major shareholders who collectively own approximately 61% of shares have committed to elect to receive the final dividend in scrip to conserve the cash resources for future expansion, as well as to demonstrate their faith in the prospects of the group. 

4. Progress on production capacity expansion

UG Healthcare expanded its annual production capacity by 500 million pieces of gloves to 3.4 billion pieces of gloves in April 2021. The productivity was, however, affected in the first two months of the financial year ending 30 June 2022 as a result of a temporary shutdown due to Covid-19 cases and the enhanced movements control the order in Seremban, Negeri Sembilan, Malaysia. Since the end of July 2021, the upstream manufacturing division has been operating with only 60% of the workforce in attendance. 

Nevertheless, the group will be ramping up productivity progressively to its full capacity with almost all of its employees fully vaccinated (with two doses of vaccines) at end of August 2021 and will be allowed to operate at 100% of the workforce in attendance under the latest government guidelines. 

The group’s new factory, which will increase production capacity by an additional 1.2 billion pieces of gloves per annum, is currently under construction. The construction was temporarily halted as the Malaysian government rolled out various tight measures since June 2021 in a bid to stop Covid-19 infections. Consequently, the commercialisation of this new capacity has been delayed to February / March 2022. This additional capacity will bring the group’s total installed capacity to 4.6 billion pieces of gloves per annum. 

5. Glove demand to remain strong but ASPs are on a downtrend

Commenting on the FY2021 financial results, Executive Director of UG Healthcare, Mr. Lee Jun Yih said, “While global gloves demand remains strong, as heightened hygiene awareness led to the structural change of increased usage of gloves across all industries – both medical and non-medical, the urgency to stockpile has reduced. Consumers are taking the option to hold lower inventory in a bid to purchase at lower prices as an increasing supply of gloves comes into the market. This resulted in the ASP of gloves reaching a peak in March 2021 and it has started on a downtrend. The current situation was the reverse a year ago.

The fluctuations in the ASP of gloves over the last 12 months created uncertainties and challenges across the supply chain. Our integrated own brand manufacturing (OBM) business model, however, balances such impact on the upstream manufacturing and downstream distribution businesses. Amid the challenging market dynamics, our customers and employees remain our highest priority to ensure they continue to be part of the group’s sustainable and steadfast growth in the long term.”   

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