Malaysian Government orders VIP Gloves to shut down all operations

The world could soon have a shortage of disposable gloves with rising COVID cases in Malaysia prompting mass lockdowns, including the halting of operations for manufacturer VIP Gloves (ASX: VIP) which has been one of the biggest beneficiaries from the pandemic. 

The operational update comes as initial lockdowns in Selangor first introduced on July 3 will be extended beyond the planned July 16 end period. Initially, VIP Gloves’ manufacturing facility was exempt from the lockdowns but those exemptions have now been overturned by the Ministry of International Trade and Industry (MITI) as the country battles to contain further COVID-19 outbreaks. 

“To date, the Company has yet to receive any updates on the reopening of the factory, hence the VIP Board has taken the proactive decision to temporarily suspend operations at its factory in Selangor while the Company awaits clarification from the Malaysian National Security Council and the respective authorities,” said VIP Gloves in a statement. 

Representative bodies of the manufacturing industry in Malaysia have sought urgent discussions with the Government however the current suspension of operations will lead to dispatch delays. 

The shutdowns will impact the planned completion of the Company’s 7th and 8th production line having been inundated by orders since the start of the pandemic when they had just two lines. Since then, they have added a whole new factory to accommodate the additional production lines to fill their backlog of orders which extends into 2022. 

Key to the huge financial success achieved by VIP Gloves over the past 12 months is the average selling price of their products. Prior to the pandemic, the average selling price of 1,000 gloves was about USD $20 but that has now quadrupled to $80. 

In the Quarter ended 31 March 2021, VIP Gloves issued $17.1 million in receipts, a 48.7% increase on the previous corresponding period when the pandemic was at its height. So strong has the Company’s margins been, they even issued a 0.18 cents per share dividend. 

Editor note: Manufacturing recommenced on 19 July 2021