Condom maker expands capacity

Goh (right):

Karex bullish on outlook, expects double-digit profit growth to continue

SHAH ALAM: World’s largest condom maker Karex Bhd is very bullish on its outlook and is planning on further capacity expansion over the next two years.

Chief executive officer Goh Mah Kiat expects the double-digit profit growth of the last few years to continue.

“I am very confident on the outlook of our business. We are also very confident the industry will continue to grow. We are on a growth trajectory and expect this to continue,” he said following a shareholders’ meeting.

“We are now reaching our fifth billion capacity. When we did our initial public offering we were only at three billion capacity. We still have expansion plans to expand it to six billion by Dec 2016 and we will also like to increase it to seven billion by Dec 2017,” Goh said.

The company recently expanded its capacity with the acquisition of another condom manufacturer, Medical-Latex (Dua) Sdn Bhd, which also came with land for possible future expansion.

“We are on the six acres land and the utilisation of space there is only about 30%.

“So that balance of the other 70% land is vacant, which gives us a lot of room to grow there as well,” Goh said.

Besides adding to capacity, Medical-Latex contributed to 8% of revenue last year.

“Our capacity utilisation as a whole has always been 70% to 75%.

“We don’t want to go too high because once we go too high it will affect our flexibility to our customers as we cannot deliver products fast enough to them,” Goh said.

“In the last quarter, our total capacity was four billion and we are running at 72% utilisation of 4 billion which is close to 3 billion pieces produced,” he added.

Karex is also continuing to look for possible acquisitions, with Goh prefering to also invest into acquiring other brand names to extend downstream.

“We have over RM200mil cash and we think that there are a lot of opportunities to buy some brands globally.

“Condoms must carry some sort of label, so branding in this area is very important,” he said.

Goh pointed out that building Karex as a brand would take a “very long time”, while acquiring other brands would be a more feasible move.

“Shareholders have asked me why don’t we sell our own Karex-branded products, but the mentality of people here, they may think that local products are not good enough, that’s why we prefer to acquire brands,” he said.

Packaging incurs the most cost to Karex, at close to 30% while raw latex made up another 23% and labour, 19%.