U.S. health guidelines could fuel a rubber glove boom
More stringent hygiene in U.S. hospitals and labs could boost sales for Malaysian rubber glovemakers who produce three out of every five pairs used in the world.
Demand for medical gloves is seen increasing ahead of guidelines from the U.S. Pharmacopeia (USP) Convention that come into effect December 2019. Known as the USP 800, the best-prac- tices standard for pharmacies and hospitals will recommend health workers don two pairs of gloves to handle hazardous drugs.
“If it’s mandatory — then boom!”Malaysian Rubber Glove Manufacturers Asso- ciation (Margma) Vice Pres- ident Supramaniam Shanmugam said in an interview in Kuala Lumpur last Thursday. “I know the amount of gloves that we export is going to be double now. But we’re still studying how the imple- mentation is going to be like.”
Top Glove Corp., the biggest of Malaysia’s 10 publicly listed rubber glovemakers by revenue, derived 31 percent of financial year 2017 revenue from North America, while rival Hartalega Holdings sits at about 59 percent. The region accounts for about a fifth of sales at Riverstone Holdings and UG Healthcare, both Singapore-listed but Malaysia-based producers.
In a market update this week, Singapore Exchange noted that the three glove- makers on its bourse — Riverstone and UG Healthcare along with Top Glove’s sec- ondary listing — averaged lion ($7.3 billion) in assets increased as a consequence,” a 12-month total return of under management and Cameron said by phone from 35 percent. The exchange owns 45.3 million shares in Japan. “It is kind of a kicker said prospects for the global Top Glove, said the poten- to what is already an attracrubber glove industry were tial impact from the forthtive story.” robust given expanding coming guidelines is “not at Other investors say it’s hard health-care demand. all” priced in. to quantify the exact impact
Ross Cameron, a portfolio “This is a material posi- from the new guidelines. manager at Northcape Capi- tive uplift to earnings as vol“It’s true that USP 800 tal, which manages A$10 bil- ume numbers will have to be might drive some incremental demand for gloves, although the quantum of that additional demand may not be material in the context of current global glove demand,” said David Smith, the head of corporate governance at Aberdeen Standard Investments, which owns Riverstone shares.
Still, Riverstone sees its customers buying more gloves from the third or fourth quarter of 2019. “It’s an additional 3.5 billion pair of gloves every month,” said Chief Executive Officer Wong Teek Son. The company, which expands capacity annually by 1 billion to 1.5 billion gloves, will need to step up production further, he said.
Margma’s Supramaniam says Malaysian producers can step up production if required as the utilization rate at the country’s 100odd factories stands now at about 75 percent.
“The industry is absolutely prepared,” he said. “By simply tweaking the manufacturing process a little bit, we’re home and dry.”