AFTER three years of losses, Main Market-listed GIIB Holdings Bhd (GIIB) is embarking on a plan to turn around its fortunes by early next year.

       The company will be divesting its core retreading business as well as two land parcels spanning 10 acres in Sabah. The latter is worth around RM36mil.

       Instead, it will focus on the remnant business of rubber compounding which involves manufacturing specialised rubber materials for high-performance products such as railway, automotive and infrastructure parts.

       The company also plans to venture into the manufacturing of rubber gloves, joining a string of listed companies that are jumping on the rubber glove manufacturing bandwagon.

       GIIB reckons that going into rubber glove manufacturing is an extension of the rubber glove trading business that the company embarked on eight months ago.

       As at the first quarter ended March 31, 2021, the rubber glove trading segment recorded a profit of RM2.59mil.

       Meanwhile, GIIB is finalising the deal to sell its entire tyre retreading business by year-end.

       Due to competition from new tyres that come from China and India, Malaysia’s retreading market fell by 58% over a five-year period from 2012 to 2017, according to Tyre Retreading Manufacturing Association of Malaysia.

       As such, in 2018, GIIB sold part of its retreading business to a private company, CK Rubber Industries Sdn Bhd, for RM7.5mil.

       Weighed down by its retreading business, GIIB reported losses over the last three years, sitting on accumulated losses and net debt of around RM97.7mil and RM40.8mil, respectively, as at the first quarter of 2021.

       Glove venture

       GIIB plans to get the losses off its books by venturing into glove business by the end of this year and by strengthening its position in the compounding business by producing other profitable products for the Asian region.

       “We will be readjusting our product mix by producing profitable products as well as by focusing on efficiency in our operations and finance costs and rationalising our assets to raise capital,” says Tai.

       One key reason that dragged the group into the red was because it failed to obtain banking facilities in the past few years.

       As such, GIIB plans to raise funds of up to RM79.8mil through a rights issue with free warrants, of which RM10mil would be used to repay bank borrowings.

       The rights issue is targeted to be completed by next month. Part of the monies would also be used to venture into the glove manufacturing business in the next four months.

       Nothing is stopping GIIB to take these bold steps as the company has laid out plans to overcome the challenging situation amid the pandemic.

       To address the issue of manpower shortage, Tai plans to obtain workers from contract worker suppliers as well as shifting its existing workers from the retreading business to its glove manufacturing facility. “As we only have five production lines to start with, we simply need 112 employees to be fully functional and it can be achieved,” he says.

       Competition

       On the competition that exists between the glove makers, he points out that GIIB would initially produce latex gloves, which is less competitive compared to the nitrile gloves that the majority of the other new players are producing.

       “However, our production lines are interchangeable. We can switch to nitrile gloves in the future. The company will monitor closely the market demand and supply of latex and nitrile gloves,” he says.

       GIIB will house five double-former glove production lines, which would have a total production capacity of 1.05 billion gloves per annum.

       Another key concern for the glove making business is the current downtrend of the average selling price (ASP) of gloves.

       “The ASP will not fall off the cliffs. The Malaysian Rubber Gloves Manufacturers Association (Margma) expects the ASP to be 40% to 60% higher than pre-pandemic levels.

       “Pre-pandemic, latex gloves were sold in high-teens per 1,000 pieces while nitrile gloves were sold at about US$20 (RM84.19) per 1,000 pieces. Even if we were to sell the latex gloves now at US$30 (RM126.28) per 1,000 pieces, it is still a lucrative business to be in,” he points out.

       Tai expects the demand of gloves to outpace supply as the pandemic has instilled increased awareness coupled with the jump in rising Covid-19 cases lately.

       Research firm Global Market Insights Inc projects the demand for rubber gloves to remain high as the global medical glove market has been projected to reach more than US$25bil (RM105.24bil) by 2027 from US$14bil (RM58.93bil) in 2020.

       Citing Margma, Tai says the global glove demand will grow by 15% to 20% per year, with the global demand for rubber gloves to reach around 500 billion pieces this year compared to the supply of 420 billion pieces.

       As such, GIIB is optimistic that the glove business would contribute positively to its earnings, saying that the lucrative segment will be the main catalyst to turn around the company’s financial performance in the near future.

       “Barring any unforeseen circumstances, we also expect our revenue and earnings from the compounding division to be better than last year,” he says.