Thu. Jan 20th, 2022

Spending more time indoors under locks, closures and other curbs may seem like a natural catalyst for more sex – and condom use – but the world’s largest manufacturer of prophylactic drugs says otherwise.

In an interview with Nikkei Asia, Goh Miah Kiat, CEO of condom giant Karex, said the use of its products has decreased by as much as 40 percent over the past two years.

The Malaysian company produces more than 5.5 billion condoms annually and operates in 140 countries. Its closest competitor, Thai Nippon Rubber, sells about $ 2 billion.

Karex markets its own brand of condoms and makes products for other contraceptive brands. The company’s One-brand condoms make up 17 percent of overall sales.

Amid weak sales, Karex is taking advantage of pandemic-related health problems to move to the booming medical gloves industry, with production set to begin in Thailand by the middle of this year.

This article is from Nikkei Asia, a global publication with a unique Asian perspective on politics, economics, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 division provides in-depth coverage of 300 of the largest and fastest growing listed companies from 11 economies outside Japan.

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Goh, the third generation of his family who led the once close but now listed manufacturer of contraceptives, said it was easy to accept that people who stay at home amid movement restrictions “have nothing. [to do] but has sex, right? ”

But the CEO said that was not the case. He explained that in developing and less developed countries, hotels and motels play an important role in providing secluded spaces for intimacy, given generally crowded homes where privacy is a premium.

“[Hotel stays were] disrupted by the pandemic, ”he said, adding that the sex industry – usually a large condom market – has been much less of a factor over the past two years.

Karex sign on his building

Karex also makes balloon catheters and lids for medical probe devices © AFP

Governments suspending condom handouts have also contributed to the downturn. “A large part [of condoms] is distributed by governments around the world, which have reduced [distribution] significantly during Covid-19, ”he said.

“In the UK, for example, the NHS closed most non-essential clinics because of Covid, and sexual wellness clinics handing out condoms were also closed.”

Due to weak demand and factory closures due to restrictions in Malaysia, Karex recorded a full year loss for fiscal 2020 ending June – the first since it was listed on the stock exchange in November 2013. Net loss was RM1 million ($ 240,000) compared to a razor-thin net profit of RM228,000 the previous year.

But fiscal 2020 revenue was 6 percent higher than the year before at RM419 million, thanks to stronger overall sales in the Americas and Asia.

According to Goh, the company has seen an increase in sales of non-condom products, namely personal lubricants as well as probe covers for medical devices and foley balloon catheters used in transurethral drainage of the urinary bladder.

But condom sales are now increasing worldwide, Goh said, noting that plants in Malaysia and Thailand are operating almost at capacity.

Walter Aw, an analyst at CGS-CIMB Securities, said rising demand could lead to stronger results for Karex as restrictions are lifted in Malaysia, as well as the easing of Covid-related curbs worldwide. “We believe that Karex will gradually increase prices to pass on higher operating costs” for raw materials and cargo, he said. Production is also expected to rise due to easing restrictions, Aw added.

In contrast, Ng Chi Hoong of Affin Hwang Investment Bank said the operating environment is expected to remain challenging for Karex, even as the company expects demand to improve in the coming quarters as social activity resumes.

“The current recovery focuses mainly on developed markets for both the proprietary brand and the commercial segment, while demand for the tender market is likely to remain weak as recent government funding remains focused on securing Covid-19 vaccines instead.” say Ng.

Karex uses its manufacturing expertise to move into the booming latex glove market © Karex

Goh said the new rubber glove factory will start with two production lines with an annual capacity of 500m pieces and will be expanded to 10 lines and 2.5 billion pieces annually. In comparison, Top Glove – also a Malaysian company and the world’s largest latex gloves manufacturer – produces about 100 billion pieces annually.

Goh said similar materials and technologies are used to make condoms and gloves, but “the barrier to entry for gloves is much lower”.

Karex’s move to the medical glove market will lead it to join a long list of Malaysian companies dominating the sector. Top Glove, Supermax and Hartaleg control about three-quarters of the global supply, utilizing Malaysia’s role as a major rubber producer. The country exports 450,000 metric tons of natural rubber annually, which ranks fourth in the world after Thailand, Indonesia and Ivory Coast.

Goh warned that the focus on combating Covid-19 should not overshadow the ongoing fight against the spread of AIDS.

“We must not overlook the frightening fact that even 40 years after the first cases of AIDS were documented, the world still reports 1.5 million HIV infections and 680,000 deaths from AIDS-related causes per year,” he said, referring to to data from the United States. Nations Global Aids Update.

Despite new drug treatments to fight AIDS, condoms remain essential to prevent the further spread of the sexually transmitted disease.

“It is critical that, although we have managed to make progress in gaining control of the pandemic, we should not lose focus on the fact that condoms will continue to play a critical role in playing as the world does. fight against the Covid-19 virus is not coming. , “he said.

The UN Global Aids Update estimated condom use has repelled 117 million new infections since 1990, with nearly half in sub-Saharan Africa and more than one-third in the Asia-Pacific.

A version of this article was first published by Nikkei Asia on January 3, 2022. © 2022 Nikkei Inc. All rights reserved

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