Molding Momentum

2 months ago . 4 min read
RY
Robert Yota
Writer at Forbes Indonesia
Molding Momentum
Ridwan Goh, Chief Executive Officer of PT Mark Dynamics. Photo Courtesy of PT Mark Dynamics.

The health crisis due to the COVID-19 pandemic has initiated a very sizable demand for personal protective equipment, with rubber gloves being strictly mandatory for hospital personnel. According to the Malaysia Rubber Glove Manufacturers Association (MARGMA) 's most recent data, the global demand for rubber gloves in 2018 was the highest ever in the last decade, with 268 billion pieces, up 15.5% from 232 billion in 2017. MARGMA estimates that the global demand for rubber gloves will reach 300 billion in 2019. As rubber gloves demand soared, order for glove moldings has increased as well.

Publicly listed PT Mark Dynamics Indonesia is a glove-molding producer that has gained since the start of the pandemic. The company recorded net sales of Rp 96.81 billion in the first quarter of this year, up 9.94% from Rp 88.06 billion in the same period last year. Most of the revenue was generated from export, with the domestic market accounted for only 5%. The majority of Mark's sales were export to Malaysia (55%), followed by China (20%), and Thailand (15%), and Vietnam (5%).

Yet, Ridwan Goh, CEO of Mark, says that the demand hasn't reached its peak yet as many latex glove producers still have sufficient supply to fulfil the growing demand during the first quarter. Furthermore, Malaysia, the company's largest market, had previously implemented countrywide lockdown throughout the first three months of the year, making it virtually impossible for Mark to export its latex glove moldings. Since Malaysia has gradually loosened its lockdown and the government has allowed factories to start progressively operating at a higher capacity, the company is optimistic about improving its sales figure in the second quarter.

Source: PT Mark Dynamics Annual Report

"The demand for glove molding will be felt more in the second quarter as latex glove companies begin to increase its production capacity following the easing restrictions. However, it will take some time for them to regain momentum. I forecast that the company's revenue will increase by 5% in this year's second quarter compared to the first," says Ridwan.

The company was founded in 2003 and operated its 15,000 square meters factory at the Medan Star industrial area in Deli Serdang, North Sumatra. The company currently has 1,500 employees and produces up to 710,000 pieces of molding every month, a 15% increase from last year's monthly average of 630,000 pieces. Ridwan says that Mark is currently the only company in Indonesia that produces glove moldings and competing with international manufacturers like Malaysia's ES Ceramics and Germany's Ceramtec. In the industry, Ridwan claims Mark has the largest production capacity globally and controls 35% market share in the glove-moldings business globally. In terms of product, 95% of the company's revenue is generated by the sales of examination glove moldings, the rest coming from surgical formers, and sanitary closets.

"The company has recently diversified by producing sanitary closets. Some of the closets' raw materials come from the excess moldings we have, so there is an economic value in using excess stock to generate other products. It helps eliminate waste too," says Ridwan.

This year, the company has allocated roughly Rp 40 billion for capital expenditures. Mark plans to increase its production capacity and to purchase a new machine that will be used to produce more sanitary closets. Last year, the company had also acquired nine hectares of land in Tanjung Morawa, Deli Serdang, to support its expansion plan in raising production capacity up to 12 million pieces per annum in 2022. As of June, the company has spent 65% of the budget. Ridwan says that the company plans to spend an additional Rp 15 billion to Rp 20 billion to buy more machines if demand for moldings keeps growing at the end of this year's second quarter. The company is also innovating to maintain its market share. The latest innovation is producing moldings using a high amount of aluminum, which significantly extends its durability. In addition, the company has started using robotic hands to create a uniform and precision moldings.

While Mark's revenue grew quite significant in the first quarter, its bottom line was relatively flat from Rp 23 billion to Rp 23.2 billion on a year-on-year basis. Ridwan says the company plans to reduce its overhead costs going forward to improve profitability. These overhead costs include depreciation and indirect expenses like machine maintenance, electricity, insurance, and fees on raw material imports. To reduce machine depreciation, the company has been scheduling routine repair and maintenance and adjusting import shipments to decrease taxes.

"For the rest of this year, we are also planning to acquire a trading company that we've deemed to be a good prospect. With this acquisition, the company hopes to improve its consolidated earnings and positively impact investors," says Ridwan.

RY
Written By
Robert Yota
Writer at Forbes Indonesia
Topics
Companies