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UG Healthcare posts 74-fold increase in Q1 net profit to S$22.7m

GLOVE manufacturer UG Healthcare Corporation on Thursday reported net profit of S$22.7 million for the first fiscal quarter ended September, a 74-fold increase from net profit of S$305,000 in the corresponding quarter last year.

The group's latest quarterly profit had also exceeded its FY2020 net profit of S$13.4 million, said the group in a bourse filing.

UG Healthcare's revenue for the quarter rose 170.6 per cent to S$71.2 million from S$26.3 million in the year-ago period, due to a higher volume of gloves sold as well as higher average selling prices on the back of stronger demand for disposable gloves and supply constraints.

The group's revenue contributions from Europe, South America, Africa and Asia each more than doubled in the period under review, while the North America and others regions booked increases of 28.3 per cent and 41.3 per cent respectively.

Segmentally, UG Healthcare said its downstream distribution business has continued to see growing demand in all key markets for both developed and developing countries.

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The upstream manufacturing business is also operating at its "optimum efficiency" of 2.9 billion pieces of gloves per annum, producing both nitrile and natural latex examination gloves. Some 85 per cent of these gloves are sold in UG Healthcare's own brand, Unigloves, through its downstream distribution companies, the company added.

On the back of improved margins for both its upstream and downstream business segments, UG Healthcare's gross margin for the quarter came in at 60.6 per cent, up by 41.7 percentage points year-on-year.

The company said that operating expenses for the quarter were "relatively stable", and its finance costs had been reduced due to lower borrowings.

Short-term borrowings were also reduced significantly on the back of stronger operating cash flow, and the company remains in a net cash position as at end-September.

UG Healthcare said it is on track to achieve its production capacity expansion plans to cope with the higher demand for gloves that was brought about by the Covid-19 pandemic. On Sept 8, the company said it has commenced work on a new manufacturing facility in Malaysia that will boost its production capacity by 1.2 billion pieces of gloves per annum.

The company is also looking to expand its production lines to produce an additional 500 million pieces of gloves per annum, which would bring its total production capacity to 3.4 billion pieces of gloves by end-March 2021.

UG Healthcare executive director and finance director Lee Jun Yih said: "We believe that our group's strategy will drive production volume in our upstream manufacturing, and enhance flexibility and sustainability in our business operations."

He added that the company is also expecting to benefit from further economies of scale beyond FY2021 with the additional capacity.

UG Healthcare said it has used some S$4.6 million out of the S$18.4 million in net proceeds that it had raised from the placement of 7.5 million new shares that was completed on Aug 21.

The group has utilised S$3.7 million of this amount for capital expenditure for production capacity expansion plans, while the remaining S$0.9 million was used for general working capital purposes.

UG Healthcare shares closed at S$0.98 on Thursday prior to the results announcement, up 2.6 per cent or 2.5 Singapore cents.

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