KUALA LUMPUR: Condom maker Karex Bhd is setting aside RM90 million in capital expenditure to increase automation in its manufacturing processes and rely less on manual labour, said chief executive officer Goh Miah Kiat.
"We need to be more efficient as we upgrade our facilities. We want to roll out more rubber, at a much faster rate while reducing headcount on the factory floor,” he told the New Straits Times on the sidelines of Invest Malaysia 2018 here today.
“We’re investing RM30 million annually in the next three years," he said.
As the world’s biggest condom maker by volume, Karex is currently producing five billion pieces annually.
The company has factories in Johor and Selangor. In Thailand, its Hatyai facilities has been upgraded with cutting edge technology.
Following a string of acquisitions in the last four years, Karex has tightened its grip on the global condom market. For every five condoms produced in the world, one is made by Karex.
Much of the Karex’s costs – mainly locally-sourced rubber and packaging materials – are priced in ringgit. It, however, quotes its clients in US dollars.
When asked if the weakening of greenback against the ringgit has dented Karex’ profits, Goh replied his sales team have been raising condom pricing.
“We’ve been keeping track of currency movement and we’ll continue to raise condom prices,” he said.
The ringgit, which outperformed the market in 2017, is likely to strengthen further in 2018.
Yesterday, the ringgit closed at a fresh high of RM3.93 against the US dollar.
The ringgit has been rapidly appreciation in recent months, in light of market expectations that Bank Negara is likely to raise the overnight policy rate (OPR) to boost savings among Malaysians.
Further, Karex's long-term fundamentals remains intact, as it continues to focus on growing its business.
“For long-term investors, our story has not changed, in that beyond condoms, our business extends into sexual wellness. We’re also producing lubricants. Our fundamentals remain intact,” he said.
“We are moving in the right track, as evidenced by the increase in our sales numbers. I’d be worried if my sales numbers dropped; but the fact Karex achieved its highest sales in the last quarter means there is growing demand for our products,” he said.
While sales has increased, Karex profits declined in the last few quarters and this is dragged by flaccid demand in the bulk tender markets.
Established in 1988, Karex emerged as the No.1 supplier of condoms globally because of its focus in bulk sales via tenders to government health and family planning agencies, non-governmental organisations and multilateral bodies like the United Nations.
When asked on the outlook for Karex, he replied there are recent signs of recovery in the tender markets.
“We see bulk purchases firming up, following 18 months of soft demand. Hopefully we’ll see better results in the months ahead.”