In Q3, Mercator Medical doubled the net profit for the first half of the year

• In line with the Management Board's expectations, significant recovery of the financial results in the wake of positive market trends (natural latex price, USD/PLN exchange rate);
• Continued growth in sales based on current assets, product and geographic expansion;
• Launch of commercial sales from the new nonwoven fabric products manufacturing plant in Poland expected as early as in Q4 this year;
• The launch of the first production line in the new nitrile gloves factory under construction in Thailand, the project in line with schedule and budget, will increase the Group’s production capacity by 150% from the second half of 2018.

Summary of consolidated financial results:

In Q3 2017, consolidated revenues of the manufacturer and distributor of single-use gloves increased by 13% YOY and reached PLN 76.5 million, and increased by 15% in the three quarters to reach PLN 226.3 million. This is one third more than the sales throughout the entire year only three years ago (entire 2014). Although margins were still under pressure caused by temporary factors (significant increase in USD/PLN exchange rate and natural latex prices at the turn of 2016/2017) due to a delayed impact of positive trends in this respect on the sales profitability achieved, the Mercator Group is successfully rebuilding its margins. In Q2, the company earned 82% of net profit for the first half of the year, and in Q3 it doubled the result for the whole first half of the year.

“We are seeing the stabilisation of the business environment, and the biggest perturbations seem to be behind us. The latex price stabilised in October at a level close to that from last year, and the dollar has seen a spectacular decrease in value over recent months. If it were not for the turbulences in the raw materials and currency markets, our financial results would be growing this year by even several dozen percent YOY. We are optimistic about the potential for growth in the future”, says Witold Kruszewski, Member of the Management Board for Finance at Mercator S.A.

Future results of the Mercator Medical Group will be also affected significantly by the implementation of the three-year strategy for the years 2016-2018. It is based on four pillars, i.e. construction of the nitrile gloves factory (a complementary product for the currently manufactured gloves of natural latex), start-up of the nonwoven products factory, expansion in Western Europe, and strengthening of the position in our region.

The construction of the nonwoven fabric products manufacturing plant in Poland (investment of PLN 4.1 million) ended in July, and after the certification period we should start selling products from the new facility to external customers as soon as in Q4 this year. The purpose of this investment is to significantly increase the operational and financial efficiency related to the assortment distributed so far, for example surgical drape sheets.

The Pikutkowo plant opening ceremony on 9.11.2017 –in the photograph: Wiesław Żyznowski, PhD, President of the Management Board of Mercator Medical, and Monika Durakiewicz, Member of the Management Board of Mercator Medical.

“We are going to reduce the turnover time for nonwoven products from 4.5 to 1.5 months, thus freeing up cash by reducing stocks. In its first year of operation, the plant in Pikutkowo may earn approximately PLN 3.5 million of revenue, with the target value of PLN 15 million per year”, informs Witold Kruszewski, Member of the Management Board for Finance at Mercator Medical S.A.

The current production capacity of the Mercator Medical Group’s nonwoven fabric products manufacturing plant is approximately 29,000 items per month. Ultimately, with only a few hundred thousand zlotys of expenditure, it will increase to 155,000 products per month. In addition, the Pikutkowo plant will also be able to manufacture medical dressings. The assortment of nonwoven products generates currently approximately 5% of Mercator Medical Group’s revenues, whereas dressings – approximately 4% of sales. The rest – approximately 91% of revenues – is generated by the sales of single-use gloves coming from the company’s own production, as well as purchased from third parties.

The estimated value of the bidding market for the surgical drape sheets is PLN 63 million in Poland, Romania, Bulgaria and Hungary, i.e. in markets where the Mercator Group currently sells its nonwoven range.

In three years we intend to increase the market share in Poland from 5% to 20%, using the competitive advantages offered by the Pikutkowo plant. This is also a good base for intensifying or starting the sales of surgical kits in other markets “, says Wiesław Żyznowski, PhD, President of the Management Board, Mercator Medical SA.

In addition, in January this year, we started extension of the gloves factory in Thailand by the addition of a synthetic latex gloves production facility (estimated investment: PLN 119 million). The first production line was finished in October and has already been launched in test mode in recent days.

“We expect to start commercial sales of nitrile gloves from our new factory later this year. We are within the budget limits and we are keeping the deadline for the whole factory”, says President Żyznowski.

Assembly of the last production line will be finished at the end of the first half of 2018. As a result, starting from the second half of the year, the Mercator Medical Group’s manufacturing capacity in terms of single-use gloves will increase by 150% and reach 3 billion gloves per year.

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Mercator Medical with its seat in Kraków is a producer and distributor of disposable medical and household gloves, medical dressings as well as medical nonwoven products whose history dates back to 1989. It has a dominant market position in Poland and is an important entity on the international scene.

The current construction of the second gloves factory in Thailand (the investment worth PLN 119 million is to be finished in the first half of 2018) will increase the company’s production capacity by 150% to reach 3 billion gloves per year. In Q3 2017 the manufacture of nonwoven products started in Pikutkowo near Włocławek. Mercator Medical has a distribution centre in Brześć Kujawski and runs direct distribution in Poland, Russia, Romania, Czech Republic, Ukraine, Hungary and Slovakia. Mercator Medical operations have a global reach – local distributors sell its products in nearly 50 countries on five continents, including the American market, and the company focuses on the ongoing geographic expansion .

Since 2013 Mercator Medical shares have been listed on the regulated market of the Warsaw Stock Exchange. The latest analytical reports prepared by brokerage houses indicate a 40%-65% growth potential for the company’s share price (DM BOŚ with TP of PLN 26.9, October 2017; Vestor DM with TP of PLN 23.1, September 2017). For more information: www.mercatormedical.eu