VIP Gloves has a plan to restart manufacturing after a shocking two years
The board of pandemic market darling VIP Gloves has laid out a plan to resurrect the company, which crashed from huge profits to huge losses in a short period.
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Struggling glove maker VIP Gloves is trying to raise $2.3m to help it fund the restart of manufacturing and hopes to resume trading of its shares on the Australian Securities Exchange, after they were first halted then suspended in February 2023.
The company, which has its headquarters in Malaysia, was a pandemic darling, with revenue in the 2021 financial year soaring 251 per cent to $48.1m, and the nitrile glove manufacturer posting a $4.7m profit.
On announcing its results for that year, VIP Gloves said it was commissioning two new production lines, bringing the number to six, and had received US FDA and European CE mark accreditation for its gloves.
By November 2021, the company’s manufacturing facilities were at full capacity and a seventh and eighth line were on track for commissioning by early 2022, adding to what was already a 768 million glove per year total output.
A second factory with another eight lines was also being contemplated, the company’s management told the 2021 annual general meeting, which would boost monthly capacity from 64 million gloves to 222 million.
Things did not go as planned, however, with revenue falling 78 per cent to $10.6m in fiscal 2022, and the company crashing to a $6.9m loss.
This loss included a $472,729 writedown of inventory due to the cost of production being higher than the realisable value of the stock, and the seventh and eighth production lines were not commissioned as planned.
“The loss has been attributable to the impact of the Covid-19 pandemic on glove production in order to comply with Malaysian Control Orders, increased production costs in particular raw material and natural gas, increased logistics costs and logistics constraints, increased competition and supply of gloves in Malaysia and internationally and a decrease and normalising of average selling prices for nitrile gloves in the manufacturing sector,” the company told the ASX in late 2022.
In December 2022, VIP Gloves announced a “temporary cessation” of manufacturing “due to unfavourable economic conditions’’.
“The decision to temporarily cease operations is due to poor market demand for nitrile gloves, low average selling prices of gloves, rising raw material costs, rapidly increasing gas utility costs caused mainly by international demand for gas as a result of the Russian/Ukraine conflict, and an increase in the minimum wage set by the Malaysian government,” the company said.
In the 2022 half year to the end of December, the company lost $12.8m on revenue of just $440,676, with VIP Gloves writing down the value of its manufacturing operations to zero, causing a $9.9m hit to the result.
The company remains way behind on filing its financial reports, lodging its half year results for the December 2023 half only on Christmas Eve this week.
This filing shows a bounce back in revenue to $2m and a smaller loss of $2m, with the company generating revenue through trading gloves.
And in some good news, the company said in early December it would be bringing two manufacturing lines back online immediately, with the remaining four to resume over the next two quarters.
The company said it had received enough orders to fill the capacity of the two lines, and “anticipates securing further orders in the coming months, which will be met by increased capacity as additional production capacity comes online”.
VIP Gloves now plans to raise up to $2.3m from five investors, including one of its directors, to inject working capital into the company.
The company said recent market conditions indicated the glove market had improved such that restarting manufacturing and bringing all six lines back into production over the next year was warranted.
A pre-condition of the new share placement was shareholder approval and relisting of the company’s shares on the ASX.
VIP Gloves will hold a meeting on January 25 in Kuala Lumpur, where most of its board live, and stream it online.
Originally published as VIP Gloves has a plan to restart manufacturing after a shocking two years
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