Jovi Ho Published on Fri, Jun 04, 2021 / 7:00 AM GMT+8

As the global battle against Covid-19 rages on, glove makers are playing a vital role, equipping frontline health workers with gloves to protect themselves against the deadly disease. 

And most of that responsibility falls squarely on the shoulders of some of the world’s top five glove suppliers, most of which are located in Malaysia and Thailand.

Placed third on the world’s largest glove producers is Sri Trang Gloves. With more than 7,800 employees and a total of 147 production lines, Sri Trang Gloves can manufacture 33.3 billion pieces of gloves per year. According to the company, this makes it the largest rubber glove manufacturer in Thailand.

Last July, Sri Trang Gloves raised THB14 billion ($669.6 million) in its IPO, amid a flurry to ramp up supply in the face of the pandemic. Shares closed on July 2, 2020, at THB30.25 ($1.36) on its debut, before ending the month at THB40.75 ($1.79).

On May 10, the company made its debut on the Mainboard of the Singapore Exchange (SGX) via a secondary listing, less than a year after its primary listing on the Stock Exchange of Thailand (SET).

“We understand that Singapore is ranked as one of the world’s most competitive economies; it is one of the key financial hubs of Asia,” says Jarinya Jirojkul, CEO of Sri Trang Gloves, in an interview with The Edge Singapore.

“It has a strategic location and its financial infrastructure is good. It offers stability and is an asset to the global market. That is why we chose SGX,” says Jarinya, adding that the company had begun mulling the listing in late-2020 following an invitation from SGX to its chairman Dr Viyavood Sincharoenkul.

The Sri Trang brand is no stranger to SGX. Since 2011, its parent company, Sri Trang Agro-Industry Public Company, a rubber plantation giant, has been dual-listed on both the Singapore and Thai bourses. Post-listing, the parent company maintains a 50.75% interest in Sri Trang Gloves, according to an SGX note on May 20.

A pandemic every decade

According to Sri Trang Gloves, the secondary listing on SGX will help it expand and diversify the company’s shareholder base with foreign stakeholders in the region and more funding channels.

As of May 25, Sri Trang Gloves has a total market cap of $5.7 billion, making it the 30th largest on SGX. The free-float market cap of the stock is $2.0 billion, representing 34% of the total value. Since its listing on the SGX, shares have hit a high of $2.07. On June 1, the stock closed at $1.95.

Incorporated in 1989, Sri Trang Gloves was founded as Siam Sempermed Corporation as a 50:50 JV between STA and Austrian manufacturer Semperit Technische Produkte Gesellschaft. On March 15, 2017, STA bought out Semperit from the JV. The following day, the company was renamed Sri Trang Gloves (Thailand).

According to the company’s prospectus, Sri Trang Gloves owns 100% of Shidong Shanghai Medical Equipment (SDME) and Sri Trang USA, based in China and the US respectively. The company also holds a 99.9992% shareholding interest in Premier System Engineering and a 99.9985% shareholding interest in Sadao PS Rubber, both of which are based in Thailand.

Previously the managing director of predecessor entity Thaikong Public Company, Jarinya was named CEO of Sri Trang Gloves on July 24, 2019. She is careful to describe the pandemic to be a “once in a lifetime” challenge, surpassing even that of Sars nearly two decades ago.

“In 2003, if you remember, we had Sars. At that time, demand was going up too. During the bird flu in 2009–2010, we also faced strong demand. It seems every 10 years we will have a pandemic like this, which drives global demand for gloves,” says Jarinya, who has more than two decades of experience in the industry.

The Malaysian Rubber Glove Manufacturers Association estimates that global demand for rubber gloves will amount to 500 billion pieces of gloves this year, with global supply projected to grow to 420 billion pieces, up from 360 million pieces in 2020. The report also estimates that 67% of the global supply of rubber gloves this year will come from Malaysia, with 18% provided by Thailand.

“I would say demand for gloves [typically] grows around 10–12% annually. When we faced Covid-19, demand went up by more than 20%,” says Jarinya. “We expect demand to exceed supply for at least the next 12 to 24 months.”

Big gloves to fill

Sri Trang Gloves manufactures two main products: natural rubber gloves using concentrated latex and nitrile gloves using nitrile butadiene rubber, a synthetic latex. About 60% of gloves sold in FY2020 ended Dec 31, 2020, were natural rubber gloves, which are biodegradable.

Today, Sri Trang Gloves counts 3,700 global customers, with its products reaching 140 countries. According to the company, customers in developed nations prefer nitrile gloves and powder-free natural rubber gloves while powdered natural rubber gloves are favoured by customers in developing countries. This is because although rubber gloves are cheaper, nitrile gloves are more resistant to chemicals and suitable for users allergic to latex.

According to the company’s presentation of 1QFY2021 earnings ended March, nitrile gloves made up 46% of the quarter’s glove sales revenue. Latex powdered gloves contributed 31% while latex powder-free gloves made up 23% of sales revenue.

Of the same sales figure, close to three quarters (71%) of revenue came from OEM products, while 29% came from original brand manufacturing (OBM).

Notably, China makes up approximately 10% of total sales volume, says Jarinya. While the company has in China its distributor subsidiary SDME, there are currently no plans for production facilities in the country, she adds.

While commodities have been in the spotlight of late, rubber has had a particularly volatile year. “If you see the outlook in 2021 when the automotive industry recovers, that will account for 80% of usage. We foresee the price of rubber will increase by 20% on average [this year] from 2020,” says Jarinya.

But the company is sheltered from such price swings as it sits under the umbrella of the Sri Trang Group. “The mother company is the Sri Trang Group. The group buys the raw materials from rubber farmers then produces raw rubber, sheet rubber or latex. We then supply downstream players like glove manufacturers and tyre makers. We are the middleman, so we can manage the price,” she explains.

“We foresee that the price of rubber will increase but this increased price will still be lower than nitrile, so it makes us competitive compared to other players,” she adds.

Presently, Sri Trang Gloves’ three factories are strategically located in southern Thailand, home to rich rubber plantations and the production of latex, the raw material for the production of its natural rubber gloves. “This allows the company to source for concentrated latex at a lower cost than its major competitors in the region,” says Sri Trang Gloves.

According to the company, its southernmost factory at Hat Yai can produce approximately 17.24 billion pieces of gloves per year. This capacity exceeds the other two factories’ combined capacity, with the Trang factory producing 9.95 billion pieces annually and the Surat Thani factory producing 6.13 billion per year.

Sri Trang Gloves has long-term plans to expand its installed capacity to approximately 80 billion pieces per year by 2024 and approximately 100 billion pieces per year by 2026, or three times its current capacity.

To that end, the company plans to expand its two smaller factories in Surat Thani and Trang, while constructing three new factories — PS Factory, with eight production lines; Anvar Factory, with 20; and Chumphon Factory, with 36. Work has begun on all three new facilities and the first of these will begin producing gloves in 3Q2021. Naturally, having the hardware is not enough. “We have a strong focus on best practices for our workforce — our employees are the most important asset,” says Jarinya.

Record earnings

A year into the fight against Covid-19, it seems the demand for gloves is far from abating; the latest sales revenue and gross profit margin figures are the highest in Sri Trang Gloves’ history.

In 1QFY2021, net profit exploded by 2,245.0% y-o-y to THB10.05 million. Total assets increased by THB9.93 billion from the end of FY2020 to THB54.17 billion, mainly consisting of THB29.45 billion in cash.

From FY2018 to FY2020, the company’s revenue grew at a CAGR of 40.4%. Over the same period, profit attributable to shareholders rose at a CAGR of 144.8%, with a net profit margin of 47.4% for FY2020. Meanwhile, the gross profit margin grew from 19.4% in 1QFY2020 to 74.0% in 1QFY2021.

The company expects global demand for rubber gloves to exceed supply. “Despite the roll-out of vaccines in many countries and the increasing supply of such vaccines, this is not expected to have a significant effect on demand for rubber gloves in the short-term,” says Sri Trang Gloves in a press release. “Concerns regarding the efficacy of such vaccines and the risk of potential mutations in Covid-19 may also continue to drive global demand for its products for medical use.”

Looking further ahead, Sri Trang Gloves expects demand for its rubber gloves to remain high even in the long-term, as it believes gloves will become standard personal protective equipment in developed and emerging markets.

Beyond the hospitals and clinics sector, Sri Trang Gloves reports an increase in demand from industries such as food and catering, transportation and security. “We expect demand for gloves in non-medical use to continue globally,” says Jarinya.