Vicplas International, a company engaged in the medical devices, and pipes and pipe fittings businesses, has reported a growth in revenue for FY2025 ended July 31, by 13.1% y-oy.

 

Revenue grew to $115.8 million due to higher revenue from its medical devices segment.

 

However, for the full year, the group reported a higher loss after tax of $2.4 million compared to the $1.4 million loss reported in FY2024.

 

This is mainly due to the lower positive results of the pipes and pipe fittings segment and higher finance costs.

 

The group says that this loss was mitigated by the improved results of the medical devices segment, albeit the negative result.

 

Revenue for the medical devices segment was $77.2 million in FY2025, a 22.3% y-o-y increase due mainly to an increase in orders following adjustments made over the course of the last two financial years by certain customers in their post-pandemic inventory holdings.

 

Meanwhile, revenue for the pipes and pipe fittings segment saw a decrease by 1.7% y-o-y to $38.6 million in FY2025 due to the segment&rsquo s approach in balancing sales against credit risk exposure, and adjusted selling prices to reflect lower raw material costs.

 

Raw materials and consumable increased 8.9% y-o-y to $4.7 million due to increase in production activities in the medical devices segment.

 

Other operating expenses increased 24% y-o-y to $19 million due to higher production activities.

 

Overall, the group recorded a loss before tax of $1.7 million for the FY2025, and a loss after tax of $2.4 million.

Vicplas International, a company engaged in the medical devices, and pipes and pipe fittings businesses, has reported a growth in revenue for FY2025 ended July 31, by 13.1% y-oy.

 

Revenue grew to $115.8 million due to higher revenue from its medical devices segment.

 

However, for the full year, the group reported a higher loss after tax of $2.4 million compared to the $1.4 million loss reported in FY2024.

 

This is mainly due to the lower positive results of the pipes and pipe fittings segment and higher finance costs.

 

The group says that this loss was mitigated by the improved results of the medical devices segment, albeit the negative result.

 

Revenue for the medical devices segment was $77.2 million in FY2025, a 22.3% y-o-y increase due mainly to an increase in orders following adjustments made over the course of the last two financial years by certain customers in their post-pandemic inventory holdings.

 

Meanwhile, revenue for the pipes and pipe fittings segment saw a decrease by 1.7% y-o-y to $38.6 million in FY2025 due to the segment&rsquo s approach in balancing sales against credit risk exposure, and adjusted selling prices to reflect lower raw material costs.

 

Raw materials and consumable increased 8.9% y-o-y to $4.7 million due to increase in production activities in the medical devices segment.

 

Other operating expenses increased 24% y-o-y to $19 million due to higher production activities.

 

Overall, the group recorded a loss before tax of $1.7 million for the FY2025, and a loss after tax of $2.4 million.

Vicplas International 569 0.00% has reported earnings of $2.5 million for the 1HFY2023 ended Jan 31, 67.9% down y-o-y.

 

The lower earnings comes despite the 5% y-o-y growth in 1HFY2023 revenue of $66.4 million, which was offset by the lower other income and higher expenses for raw materials and consumables, purchase of finished goods for resale and employee benefits.

 

According to the group, the lower earnings was due to the impact on its medical devices segment, which was affected by the early Lunar New Year festival, which took place during the 1HFY2023.

 

Other operating expenses also grew.

 

During the 1HFY2023, other income fell by 41.8% y-o-y to $1.6 million mainly due to lower tooling income as customers in the medical devices segment postponed or delayed the commercialisation of some new projects on the back of the uncertain macroeconomic conditions.

 

The higher expenses was due to the higher revenue, inflationary pressures, higher headcount and increased overtime pay. Other operating expenses increased mainly due to costs associated with the new Changzhou plant extension and the potential new plant in Mexico. The higher expenses were also due to the higher marketing and travelling costs upon the reopening of borders.

 

Earnings per share (EPS) stood at 0.48 cents on a fully diluted basis.

 

Cash and cash equivalents as at end-January stood at $6.7 million.

 

No dividend was declared for the period.

&ldquo Although we had increased orders, customers slowed the rate of new products going to market due to uncertain global macroeconomic conditions. Nevertheless, the medical devices segment continues to commercialise new projects and expand its global customer base in 1HFY2023 as it continues to build strong capabilities and expand its global manufacturing footprint to give customers more options in their supply chain. Our pipes and pipe fittings segment continues to improve in 1HFY2023 as construction activities picked up in Singapore and increased its segmental result due to supply improvements and its implementation of cost savings initiatives,&rdquo says group CEO Walter Tarca.

 

&ldquo As a group, we are keeping a close eye on the global economy given the uncertain global macroeconomic conditions, inflationary pressures, rising interest rates and geopolitical tensions. We are dealing with this challenging operating environment by focused execution of continuous improvement initiatives to drive operating costs down, whilst at the same time, investing in development and expansion initiatives. This will help us capture new business opportunities and enlarge our geographical footprint, in order to strengthen our base for future growth,&rdquo he adds.

 

Looking ahead, the group says it is adopting a &ldquo dual approach&rdquo where they will invest in continuous improvement initiatives to lower operating costs while &ldquo investing in development and expansion initiatives that will reap new business opportunities and strengthen its base for future growth with a wider geographical footprint&rdquo .

 

A final dividend of 0.45 cent per share has been declared. The dividend will be paid out on Jan 20, 2023.

 

Vicplas International has reported profit after tax of $8.8 million for the FY2022 ended July 31, 15.0% lower than the profit after tax of $10.4 million in the corresponding period the year before.

 

Profit after tax for the 2HFY2022 stood 29.4% lower at $3.8 million from the previous year&rsquo s $5.4 million.

 

The lower profit after tax for the full year was due to the rising supply chain costs and other disruptions that stemmed from the Covid-19 pandemic, all of which affected the group&rsquo s medical devices segment. During the year, the group&rsquo s bottom line was also impacted by higher costs associated with business expansions such as increasing manufacturing facility capacity and bringing onboard additional technical and business development resources.

 

During the FY2022, revenue rose by 14.8% y-o-y to $130.8 million due to higher revenue from both Vicplas&rsquo medical devices as well as pipes and pipe fittings segments.

 

Revenue for the medical devices segment increased by 15.5% y-o-y to $92.6 million due to increased orders while the pipes and pipe fittings segments saw revenue increase by 13.1% y-o-y to $38.2 million due to the gradual recovery of the construction industry.

 

Other income fell by 15.1% y-o-y to $5.9 million mainly due to the absence of Covid-19 related government subsidies.

 

Raw materials and consumables used rose 22.1% y-o-y to $63.4 million mainly due to the higher raw materials cost.

 

Employee benefits expense increased by 17.9% y-o-y to $41.8 million due to higher headcount and increased overtime especially in the medical device segment. This was to meet the higher revenue and investment in medtech talents to meet future demand, says the group.

 

Other operating expenses rose by 4.5% y-o-y to $14.9 million due to higher electricity tariffs and higher cost of repairs and maintenance to support the increase in revenue.

 

During the year, the group&rsquo s adjusted ebitda fell 1.5% y-o-y to $18.3 million.

 

Earnings per share (EPS) for the FY2022 stood at 1.70 cents on a fully diluted basis.

 

As at July 31, cash and cash equivalents stood at $8.89 million.

 

A final dividend of 0.45 cent per share has been declared. The dividend will be paid out on Jan 20, 2023.

 

&ldquo Vicplas has achieved a respectable set of results for FY2022 given the backdrop of an uncertain and more costly operating environment. Our medical devices segment has maintained its revenue growth momentum but was affected by rising supply chain costs and other disruptions brought on by the Covid-19 pandemic,&rdquo says Walter Tarca, group CEO of Vicplas.

 

&ldquo Despite this, it continues to expand its manufacturing footprint and dedicate resources to other technical and business development areas to meet increasing demand from the long-term trend of medical device outsourcing,&rdquo he adds.

 

In his statement, Tarcas announced that Vicplas&rsquo medical devices segment is &ldquo actively negotiating&rdquo for a suitable site in Juarez, Mexico, to initiate its fifth manufacturing location to provide greater flexibility and choice for its customers.

 

In addition, the group&rsquo s pipes and pipe fittings segment, which recovered in FY2022, alongside the recovery of Singapore&rsquo s construction sector, will &ldquo continue to support the local construction industry and will continue to grow its civil engineering projects, as well as product expansion beyond the built environment.&rdquo

 

&ldquo We are cautiously optimistic for the next financial year as we need to keep a close watch on the challenges that may arise from the ongoing Covid-19 pandemic, current inflationary pressures, and uncertainties in the wider macro environment,&rdquo Tarca says. &ldquo Besides continuing to exercise prudent cost management, we will also continue to develop new business opportunities and strengthen our capabilities for future growth.&rdquo

 

The group, in its statement, adds that it expects its revenue to continue growing into the next reporting period with the continued expansion of the medical device segment and the improved outlook for the pipes and pipe fittings segment as the construction sector in Singapore improves.

DESPITE nervy times in China, mainboard-listed Vicplas International : 569 +5.13% will stick to its plan to open its third and latest medical technology (medtech) manufacturing outlet in Changzhou next month &mdash ramping up its medical devices production capacity in the country by 60 per cent.

 

It currently already operates 2 medical devices manufacturing plants there: one in Changzhou and another in Xiamen.

 

&ldquo Quite frankly, we&rsquo ve maxed out the capacity in our other (Changzhou) plant. We have a number of projects that are reaching the end of their commercialisation phase,&rdquo said deputy group chief executive officer of Vicplas International, Walter Tarca.

 

With 2 projects heading into mass production, the opening of the latest 7,000 sqm plant will start production from the day doors open in June.

 

The plant, along with its cleanrooms where medical devices are produced, is now in the validation phase with auditors.

 

Tarca said he is conscious of potential supply chain issues, but believes them to be manageable.

 

China is seeing some of its harshest pandemic restrictions yet, and Beijing and Shanghai are tightening curbs in line with the county' s strict zero-Covid stance. According to media reports, the Shanghai port had been running at about half its capacity for a month since the city-wide lockdown began in April.

 

Tarca said the port is now fully active and things are moving faster than before, although there are congestions and longer wait times to contend with.

 

Some 80 per cent of the group&rsquo s products manufactured in China pass through Shanghai, while the rest go through the Nanjing port.

 

&ldquo The biggest disruption I guess for companies like ours and for all companies is the supply chain,&rdquo he said. &ldquo There&rsquo s quite a lot of backlog, ships waiting to be loaded and unloaded.&rdquo

 

Though the costs of logistics have gone up, these are borne by customers and don' t affect the group&rsquo s profits. Meanwhile, much of the raw materials needed for manufacturing comes from the Asian region, making them logistically easier to procure.

 

&ldquo The majority of our products are being sold to the US and Europe, so they have long distances to travel. Whereas for the inputs, a lot of them come from Japan and Asia &mdash so much closer to home,&rdquo he said.

 

Other than manufacturing plants in China, it also operates a 2,600 sqm plant in Kington, in the United Kingdom as well as a 7,410 sqm plant at its corporate headquarters in Singapore. It has commercial offices in Singapore, Shanghai, Kington, and Connecticut in the US.

 

The group is in &ldquo advanced stage talks&rdquo to build another manufacturing plant near the United States, in a location such as Mexico or Costa Rica. Tarca expects this plant to be up and running within the next 2 years.

 

&ldquo We see a need to have a plot closer to the US, as the US is the primary medical device market in the world,&rdquo he said. &ldquo Our customers are very excited&hellip that we have made the strategic decision to come closer to them.&rdquo

 

Locating closer to the US would offer greater flexibility to sell into the US and Europe markets. The group doesn&rsquo t have such flexibility at the moment and this is one of the areas it is trying to improve on, he added.

 

Transitioning to medtech

 

A nearly 40-year-old pipe making company, Vicplas had shifted its focus towards medical devices only in the last 7 years or so. Its business focus is split at about 70 per cent for the medical devices segment and 30 per cent on the pipes and pipe fittings segment, Tarca said.

 

The medtech contract manufacturing business is parked in wholly owned subsidiary Forefront Medical Technologies, which it acquired in 2008 and of which Tarca is president.

 

Out of the group&rsquo s 1,100 employees, more than 900 are with Forefront Medical Technologies.

 

In 2015, the group recorded revenue of S$74.1 million. Of this, S$23.3 million came from the medical devices segment. In 2021, revenue was up to S$113.9 million and S$80.2 million was from the medical devices segment. The 2021 figure was the highest-ever revenue figure for the segment.

 

Over the past 5 financial years (FY2017 to FY2021), the group&rsquo s revenue has seen a compound annual growth rate (CAGR) of 15.7 per cent. Steady growth in the medical devices segment has contributed to that.

 

In its 2021 annual report, Vicplas said the medtech contract manufacturing market is expected to show a CAGR of 11.4 per cent through to 2025.   This is attributable to the ageing population, increased demand for improved healthcare in developing markets, and increased willingness by product owners to outsource manufacturing to trusted partners that can fully support product and process innovation.

 

&ldquo The big companies, they don' t want to keep investing in factories. It&rsquo s not efficient for them. What they want to focus on is sales and marketing, primary research and development so they' re quite happy to outsource the products to trusted contract manufacturers. That' s what we want to be,&rdquo Tarca said.

 

One of the attributes that gives the group an edge is being &ldquo highly vertically integrated&rdquo . When a client comes with a concept, Vicplas is able to design for manufacturability, prototype, create the tools, manufacture and assemble the product.

 

&ldquo One of the things they (customers) like about us is that we' re very innovative. We find a way to get things done,&rdquo he added.

 

To grow its revenue streams, Vicplas aims to dive deeper into the extrusion space where it makes medical tubings. It already makes such tubings for a variety of medical areas such as sleep apnoea treatment, ventilators, drug delivery systems, and infusion devices.

 

&ldquo One of the areas we see ourselves moving in is making small things,&rdquo Tarca said. &ldquo We&rsquo re already in that space, but we want to get more involved.&rdquo

 

Covid-19 more bane than boon

 

Shares of Vicplas had surged to as high as S$0.60 in 2020, possibly as investors flocked to healthcare plays thinking they would benefit from the pandemic.

 

They have since fallen back to close at S$0.20 on Friday (May 27), down 15.2 per cent year to date. That gives the counter a market capitalisation of close to S$100 million, with a price-to-earnings ratio of 9.7 and a yield of 2.3 per cent.

 

Tarca said tying the success of the medtech industry to the Covid-19 pandemic is a common misconception.

 

&ldquo I think (Covid-19) has been a negative factor for us,&rdquo he said. &ldquo We don&rsquo t make ventilators, test kits, or rubber gloves.&rdquo

 

Most of the items Vicplus produces serve long-term needs in the medical industry: airway management, surgical devices, orthodontics, endoscopy, drug delivery and diagnostics, among them.

 

In fact, many of the group&rsquo s products support elective surgeries. For instance, it produces infusion devices used for chemotherapy &mdash something that saw a dip in demand during the pandemic as healthcare in general steered its resources towards batting Covid-19.

 

&ldquo Now of course with things opening up and Covid-19 more under control, those orders have come back, and we&rsquo re currently in backorder for a lot of the products,&rdquo he said. &ldquo We&rsquo re trying to catch up, which is a good thing.&rdquo

 

Vicplas International has reported earnings of $5.02 million for the 1HFY2022 ended January, 0.6% higher than earnings of $4.99 million in the corresponding period a year ago.

The earnings growth was attributable to a growth in the half-year revenue and offset by the higher costs in energy and raw material, as well as the absence of Covid-19 grants from the government.

This translates to earnings per share (EPS) of 0.97 cent, up from the previous half-year period&rsquo s 0.96 cent on a fully diluted basis.

Revenue for the 1HFY2022 grew 11.9% y-o-y to $63.2 million due to higher revenue from both Vicplas&rsquo medical devices as well as its pipes and pipe fittings segments.

Revenue for medical devices grew 11.0% y-o-y to $45 million due to higher customer orders, while revenue from the pipes and pipe fittings segment grew 14.1% y-o-y to $18.3 million from a gradual recovery in Singapore&rsquo s construction industry on the back of the easing Covid-19 disruptions.

 

Other income during the half-year period fell 4.0% y-o-y to $2.7 million as there were no Covid-19 related government subsidies.

In the 1HFY2022, raw materials and consumables used increased by 18.3% y-o-y to $31.0 million, mainly due to the higher cost of raw materials.

Employee benefits expense for the half-year period rose by 15.5% y-o-y to $19.9 million due to increased headcount and overtime, especially in the medical devices segment, on the back of the higher revenue.

Other operating expenses increased by 16.1% y-o-y mainly due to the rise in electricity tariff as well as higher tooling expenses and repairs and maintenance.

 

No dividends were declared for the period.

As at end-January, cash and cash equivalents stood at $5.5 million.

Looking ahead, the group says it expects its revenue to continue growing for the rest of the year ending July, although the rate of growth can be expected to moderate due to the effect of a higher base.

It adds that it is cautiously optimistic about its revenue growth over the remainder of FY2022, while keeping an eye on the impact of increasing operating costs, disruptions or slowdown in the logistics or supply chain and higher development and expansion costs.

&ldquo The medical device segment&rsquo s positive revenue momentum is expected to continue, albeit with some headwinds and higher costs that we have to mitigate. We have continued to expand our manufacturing capacity and our capability to provide attractive solutions to our growing customer base and focused on delivering operational excellence initiatives that can keep our manufacturing footprints competitive,&rdquo says Walter Tarca, deputy CEO of the group.

He adds, &ldquo Our Changzhou plant extension is on track for opening in the second half of this financial year and will provide needed space for new projects and increase in production. The pipe and pipe fittings segment is also recovering alongside Singapore&rsquo s construction sector, and is well-positioned in light of increased public housing launches over the next two years. All in all, we are cautiously optimistic given the current international trading conditions and geopolitical uncertainties.&rdquo

 

CGS-CIMB on Wednesday (Jan 26) initiated coverage on Vicplas International Vicplas Intl: 569 +2.27% with an " add" call and a target price of S$0.275.

 

The target price is 11 times the brokerage' s estimates for the medical device maker' s earnings for the calendar year of 2023 -- roughly in line with the sector' s average.

 

In a research note, analysts William Tng and Izabella Tan said they expect Vicplas' s earnings per share (EPS) to grow at a compounded annual rate of 10.8 per cent from FY2022 to FY2024 -- driven by growth in its medical contract manufacturing business.

 

Key growth drivers include an ageing population, increasing demand for improved healthcare in developing markets, as well as higher willingness by product owners to outsource manufacturing to partners that can support product and process innovation.

 

The medical devices business has been growing fast. Vicplas reported core EPS of S$0.02 for FY2021 ended July -- more than double its core EPS of S$0.009 for FY2020. CGS-CIMB is projecting core EPS to hit S$0.027 in FY2024.

 

Vicplas makes a wide range of medical devices including pharmaceutical bottles, surgical devices, orthodontics and nasal swabs. It also has a pipes and pipe fittings business.

 

CGS-CIMB said the pipes segment should also do well as Singapore' s construction industry recovers. The brokerage is projecting this segment will be able to grow revenue by 4.3 per cent year on year from FY2022 to FY2024 -- based on its house GDP growth forecast of 4.3 per cent for Singapore.

 

The analysts cautioned, however, that the segment' s profit margins could be affected by higher operating costs and raw material prices in FY2022, with labour shortages and supply chain disruptions remaining key risks.

 

Profit from the pipes segment grew to S$3.2 million in FY2021, from S$2.6 million in FY2020.

 

CGS-CIMB is also forecasting a dividend yield of 2.3 to 2.8 per cent over FY2022 to FY2024.

 

" Re-rating catalysts are stronger-than-expected earnings due to new customer or product wins in FY2022 to FY2023," the analysts said.

 

" Downside risks include production disruptions from movement restrictions due to measures to contain the spread of Covid-19, and production disruptions due to power shortage at its China plants."