The income of glove manufacturers and the consumer sector will receive minimal impact for the financial year ending 2021 (FY21) following the Suez Canal incident which was blocked by a ship.
According to PublicInvest Research, preliminary estimates suggest that the two -week disruption has minimal impact, even though the European market accounts for 30 to 40% of glove manufacturers ’sales quantities.
"However, the continued disruption may exacerbate the container shortage situation which has led to delays in receipt of revenue for glove manufacturers," the firm said in a research note today.
In addition, Bernama reported, the potential for higher freight charges will not reduce the glove company's margins as shipping costs are usually borne by buyers.
Although glove manufacturers usually receive revenue when goods are delivered to the port but they are expected to obtain ship orders before transporting goods to the port, the situation of shortage of ships may cause delays in receipt of revenue.
Meanwhile, the recovery in global economic activity is expected to be supported by the launch of vaccination programs and stimulus packages that will boost consumer confidence.
Given that the Suez Canal in Egypt is an important route to world trade, the incident will further affect the already severely affected global supply chain.
"However, we are of the view that the incident will not have a big impact on the income of the companies under our coverage.
“Based on the calculations, we estimate the revenue impact for Kawan Food and QL Resources is minimal at 1.0% in the event of a two-week delivery delay as both companies have geographically diverse markets. Europe contributed 9.0% of Kawan Food's Financial Year 2020 sales, ”he said.
