Medtecs 9M net profit down 77% to US$19.3m; ventures into disposable nitrile gloves

CATALIST-LISTED protective gear manufacturer Medtecs International Corp V3M : V3M 0% reported a 77 per cent slide in net profit for the 9 months ended September 2021 to US$19.26 million, as demand for personal protective equipment fell.

Stock-piling exercises for existing customers in 2020 have completed, while the supply and prices of the personal protective equipment (PPE) market have stabilised globally, the group said in a business update filed with the Singapore Exchange on Monday (Nov 22).

In a separate update on its joint venture with US healthcare market player ACO International, Medtecs said its wholly-owned subsidiary Medtecs (Asia Pacific) and ACO are in discussions to enter into a share subscription agreement. Following an initial capital injection, the joint venture company Resilient Medical will have an initial issued and paid-up capital of US$9 million comprising 6 million ordinary shares held by Medtecs (Asia Pacific) and 3 million ordinary shares held by ACO.

Subject to the fulfilment of certain conditions, ACO will also have the right to subscribe for up to 1 million additional ordinary shares, which will top up Resilient Medical's potential injection of capital to US$10 million. These rights will be conferred to Medtecs (Asia Pacific), if ACO does not exercise them.

Resilient Medical has also entered into a lease agreement to set up a glove manufacturing facility in Cambodia. The demand for disposable nitrile gloves has outpaced supply since the start of the Covid-19 pandemic, Medtecs noted.

Construction of the facility had started in July, at a site to develop the facility on a plot of about 7.5 ha in Cambodia's Svay Rieng province. The site is also located within the Manhattan Special Economic Zone (MSEZ).

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The new facility will house 2 production lines, with a production capacity of approximately 50 million pieces of gloves per month. It is expected to be completed in the first quarter of 2022.

"Setting up the proposed business in the MSEZ provides key advantages as the MSEZ provides utilities, well-developed infrastructure and on-site, one-stop services by various government agencies for import/export permits and customs clearance," Medtecs said.

Medtecs' board believes this new business can help the group capitalise on strong global demand for gloves and add new revenue streams. It also noted that the group has been investing and operating in Cambodia for over 2 decades via 2 existing manufacturing facilities.

Medtecs also said it aims to increase business-to-consumer sales through major chain stores, pharmacies and supermarkets, and is continuing to grow its retail business through the use of global e-commerce platforms.

The group said in its financial update that it expects to remain profitable for the fourth quarter ending Dec 31, 2021 and for FY2021 as a whole, but that it expects sales and profitability for the second half of the financial year to be lower than the first half.

Medtecs shares closed at 30 Singapore cents on Monday, down 1.64 per cent.

READ MORE:

• Medtecs Q1 net profit jumps to US$13.2 million as PPE demand 'remains elevated'

• Medtecs in joint venture with US healthcare market player