Aspen to scale down its glove-making unit, warns of material impact

KUALA LUMPUR (June 9): Singapore-listed Aspen (Group) Holdings Ltd has announced plans to "significantly" scale down its glove-making unit as it suffers from industry-wide issues from lower demand and falling average selling price (ASP), resulting in it being unable to secure significant new purchase orders from its existing or new customers.

This comes after Aspen Group ventured into glove-making business in August 2020 and set up its glove manufacturing plant at Kulim Hi-Tech Park in Kedah. Its glove unit is operating under the name Aspen Glove Sdn Bhd (AGSB), which is a joint venture between Aspen Group and CMY Capital Sdn Bhd, an investment holding company founded by businessman Tan Sri Chua Ma Yu.

Along with the scaling down of AGSB's operations, the group is also currently evaluating various options on the future direction of AGSB, including recapitalisation, entering into a joint venture and/or disposal of the entire business and assets of AGSB, Aspen's filing with Singapore Exchange showed.

Its president and group chief executive officer Murly Manokharan attributed the move to the increasing headwinds for the medical glove market resulting from a drastic reduction of demand owing mainly to the easing of the Covid-19-induced demand and high inventory levels of medical gloves, heightened competition, global supply chain challenges, higher shipping and logistics costs, high inflation and continuous decline in the ASP of gloves.

He added the glove unit also took a hit from the geopolitical tensions and risks of a global economic recession from the ongoing Russia-Ukraine conflict.

He also cited that further margin compression is expected due to the higher production costs also dragging on its glove-making business.

"Amidst the falling ASP, glove buyers have refrained from stocking up on gloves to avoid locking in purchases at high prices.

"As a result, AGSB has been unable to secure any significant new purchase orders from its existing or new customers," he added.

Against this backdrop, Murly warned that the scaling down of AGSB's operations is expected to have a material impact on the group's results in the current financial year ending June 30, 2022.

In the meantime, he said the group will continue to focus on its property development sector and food and beverage sector which are showing signs of recovery as most countries progressively transition towards endemic management of Covid-19.

However, he cautioned that the recovery of these sectors may be thwarted by the supply chain disruptions which persist, soaring price inflation and fears over a global economic recession.

Aspen Group is a Penang-based property developer. Its flagship project is Aspen Vision City in Batu Kawan, with an estimated gross development value of RM13 billion.

At 10.30am, Aspen Group shares traded unchanged at six cents. Year to date, it has declined 45.45%.

Edited by Surin Murugiah