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The Mercator Medical Group is growing rapidly, with results temporarily under pressure

Estimated results for the first half of this year calculated on the basis of financial data of the Mercator Medical Gro…

Estimated results for the first half of this year calculated on the basis of financial data of the Mercator Medical Group for Q2 2017 indicate that consolidated revenues of the manufacturer and distributor of single-use gloves increased by 15% YOY, and reached PLN 148.3 million.

In our industry, the key challenge is to win markets. That is why I very much welcome the achievements of the international sales team of the Mercator Medical Group in respect of long-term dynamic growth of sales”, stresses Wiesław Żyznowski, PhD, President of the Management Board, Mercator Medical SA.

Due to factors of a temporary nature, the EBITDA result of the Mercator Medical Group was estimated at PLN 5.9 million in the first half of the year (-52% YOY), and its net profit amounted to PLN 1.1 million compared to PLN 7.2 million in the previous year.

If it were not for the turbulence in the raw materials and currency markets, our financial results would be higher this year even by several dozen percent YOY. Due to the temporary nature of these factors, 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.

In Q1, the distribution segment found itself under pressure caused by a strong dollar (even above PLN 4.2), and the margin levels in the production segment were affected by the unusually dynamic increase in natural latex prices (+75% in the period September 2016 – February 2017). In Q2, natural latex prices already stabilised at a significantly lower level (approximately 6 MYR per kg for Bulk Latex, approximately -25% off peak), as did the dollar exchange rate, which approached PLN 3.7.

As a result, in the distribution segment, which accounts for more than 70% of revenues, the assortment included products manufactured from more expensive raw materials purchased in Q1 – natural and synthetic latex. At the same time, however, we faced market pressure on the decrease in the prices of finished goods due to on the one hand raw material prices falling already in Q2, and on the other hand – the USD/PLN exchange rate. This resulted in decreased distribution margins. In the production segment, the situation may only improve now that the raw material – natural latex – ordered at lower prices goes into production. We are currently seeing a calm market situation, which should mean the return of dynamic increases in profits earned by glove manufacturers and distributors”, says Witold Kruszewski.

Future results of the Mercator Medical Group will also be affected by the effects of 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), construction of the nonwoven products factory, expansion in Western Europe, and strengthening of the position in our region.

Construction of the nonwoven fabric products manufacturing plant in Poland which started last summer (approx. PLN 4 million) has already been completed and production should start soon. 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. 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 should be finished in August this year, and assembly of the last one will be completed at the end of the 1H 2018. As a result, starting from the second half of the year, Mercator Medical’s manufacturing capacity will increase by 150% and reach 3 billion gloves per year.

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