Careplus thrives in niche market

KUALA LUMPUR: ACE Market-listed glovemaker Careplus Group Bhd said finding the right niche and target market for its products have enabled it to thrive in an industry largely dominated by the “big four” players — Hartalega Holdings Bhd, Top Glove Corp Bhd, Kossan Rubber Industries Bhd and Supermax Corp Bhd.

“We need to find our niche and invest in automation like the bigger players … They may be dealing with big customers, so we concentrate on the smaller-sized ones that still require our products,” Careplus group chief executive officer Lim Kwee Shyan (pic) told The Edge Financial Daily in an interview.

Lim, who is also president of the Malaysian Rubber Glove Manufacturers Association (Margma), said there is a misconception that the glove industry is all about size.

“Careplus’ market share may be less than 1%. But just as there are five to six big players in the industry, there are also another 20 to 30 smaller-sized companies which have remained in the game,” he said.

Currently, Careplus has two factories (Factory 1 and 3) in operation, with another factory (Factory 4) completed last month. The group’s Factory 2 is currently non-operational.

Lim said the group is in the midst of expanding the production lines at Factory 4, which has a 12-production-line capacity, with two nitrile glove production lines targeted to run this year, bringing the group’s total production lines from its three operating factories to 17.

“The group will continue with its expansion plan for Factory 4 by adding new production lines progressively,” he said.

Factory 1 is run by its wholly-owned subsidiary Rubbercare Protection Products Sdn Bhd, while Factory 3 is operated by Careglove Global Sdn Bhd, a joint venture (JV) with Brazilian partner Descarpark Descartaveis Do Brasil Ltd.

“Our Factory 1 and 3 have a capacity to produce 155 million gloves per month, and the two new production lines in Factory 4 will have the capacity to produce up to 20 million nitrile gloves per month,” said Lim.

Careplus’ current product range comprises mainly latex gloves, which constitutes 97% of its total sales and are manufactured under its Rubbercare and Guardian brand names. The other products include surgical gloves, nitrile gloves, as well as medical disposable products such as face masks and respirators.

Lim said focusing on latex gloves is part of the group’s strategy of establishing a core competency, and enhancing it in terms of machine design, space capacity and human resources.

Through Careglove Global, which was set up in 2011, the group manufactures gloves which are exported to the Brazilian market, which accounts for 60% of the group’s total sales.

Prior to the JV, the group’s biggest exports were to Hong Kong and Japan, which now constitute only 20% of its total sales.

Careplus reported a net profit of RM1.56 million for its second quarter ended June 30 of financial year 2014 (2QFY14) on revenue of RM35.24 million. For the 11 months period ended Dec 31, 2013 (FY13), the group recorded a net profit of RM1.2 million on revenue of RM129 million. In June last year, the group had changed its financial year from Jan 31 to Dec 31.

Lim said the group did not perform as well as it should have in FY13 due to the expansion expenditure it had incurred for its Factory 3 expansion.

For FY14, Careplus will focus on organic growth by focusing on growing its existing customer base, as well as its internal functions of information technology (IT) and human resources.

“As long as we have a product that is satisfactory to our customers and we have good internal controls on IT and human resources, we will be able to maintain our profitability in FY14,” said Lim.

Shares of Careplus rose 1.49% to close at 34 sen last Friday, bringing a market capitalisation of RM79.9 million.

This article first appeared in The Edge Financial Daily, on August 25, 2014.