Riverstone's Q3 net profit up four times with strong demand for gloves

MALAYSIAN glove maker Riverstone Holdings on Monday announced that its net profit had grown four times to RM178.6 million (S$58.2 million) for its third quarter ended Sept 30, from RM35.6 million a year ago, unhampered by rising packaging and raw material costs. (see amendment note)

Revenue rose 92 per cent to RM482.3 million, due to the surge in global demand for personal protection equipment amid the Covid-19 pandemic, which led to higher average selling prices of the group's healthcare examination gloves since June this year.

The company's high-tech clean-room gloves also experienced strong volume growth and several increases in average selling prices during this period due to strong demand, it said in a voluntary update.

The group's blended gross profit margin expanded 31.7 percentage points year on year to 52.2 per cent for the quarter.

Cash inflows from its operations also beefed up its balance sheet. As at the end of September, it had cash and cash equivalents of RM427.3 million, up from RM130.4 million a year ago, which it said will enable it to carry out its expansion plans and weather the macroeconomic headwinds from the Covid-19 pandemic.

Due to the strong demand for both healthcare and clean-room gloves, the group's current order book has been filled up to the first half of 2021, it added.

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Phase Six of the group's expansion plans is on track to raise total production capacity by 1.5 billion pieces of gloves to 10.5 billion pieces annually by year's end. For this phase, Riverstone has commissioned five production lines which are now in operation; another two are to be commissioned progressively over the next two months.

The construction of the company's latest production facility for Phase 7 of its expansion plans is also ongoing. Under this phase, the group will add seven production lines next year, with the first line of this new phase ready in April 2021.

This is expected to add up to 1.5 billion pieces of gloves to bring the total annual production capacity by up to 12 billion pieces by Q4 2021. Even at this early stage, all the new capacity coming online for Phase Seven have already been taken up by the group's customers, it said.

Executive chairman and chief executive Wong Teek Son said: "Beyond Phase Seven...we have in place a clear expansion roadmap that will increase our production capacity by up to 1.5 billion pieces of gloves each year to a total of up to 15 billion pieces by end-FY 2023, representing a growth rate of approximately 59 per cent from our expected capacity of 10.5 billion gloves at the end of FY2020."

The Malaysian manufacturers' association MARGMA said that the market for healthcare gloves is expected to grow at about 11 per cent per year on a large base of 296 billion in 2019 to reach about 330 billion pieces worldwide in 2020.

Meanwhile, Riverstone's clean-room glove segment is also recording growing demand from the technology and manufacturing industries, such as lenses, batteries and semiconductors, and is expected to ensure earnings resilience for the group's longer-term growth, Mr Wong said.

Amendment note: An earlier version of this article incorrectly stated that Riverstone's net profit had increased by five times, when it in fact increased by four times.