MARC has affirmed the rating of AID on Englotechs Holding Bhd’s (Englotechs) Murabahah Medium-Term Notes Programme of RM50.0 million with a stable outlook. The rating affirmation reflects the company's position as a leading manufacturer and exporter of industrial cotton work gloves in Malaysia; a foreseeable increase in demand for its products, consistent operating margins coupled with a rising revenue trend over the last five years. The rating is however moderated by increasing competition from China in the manufacture of standard made gloves, and rising trade receivables and inventory levels which have resulted in higher debt levels.
With 15 years of experience in the manufacturing and trading of industrial cotton work gloves, Englotechs is recognised as an Original Equipment Manufacturer (“OEM”) for a few multinational companies operating worldwide. Its ability to manufacture various types of high quality gloves has helped the group to widen its clientele base, a significant proportion of which are foreign based, over the years. The Group has also differentiated itself by committing to continuous Research & Development as a means to widen as well as diversify its product base (from standard-made-gloves to various custom-made gloves), and developing breakthrough products such as its “ Water based Polyurethane Dipped Gloves”.

Englotechs operates two plants, located in Padang Meha Industrial Estate, Kedah and Lianyungang in China.   As at 31 December 2005, Englotechs assets included 1,100 Shima-Seiki fully automated ultra-fine seamless glove knitting machines with a maximum annual production capacity of more than 3.7 million dozen pairs of string knit gloves and more than 3.9 million dozen pairs of cut and sewn cotton gloves. Apart from increasing its production capacity and product base, the Group’s future strategy going forward, will involve developing products under its own brand name.
 

Revenues increased to RM97.5 million for FY2005 aided by the introduction of new products, from RM85.8 million recorded in FY2004. Operating income for FY2005 increased to RM13.2 million from approximately RM12.0 million for the same period in FY2004. The company's liquidity position remains adequate despite pricing and margin pressures from rising operating costs. As an export oriented manufacturer, 80% of Englotechs’s revenues are derived from exports with no revenue concentration in any particular country.

Of concern however, are Englotechs’s debt leverage levels, which have increased over the years but has moved significantly higher to 1.02x in FY2005. The debt profile is skewed towards long term debt incurred mainly for capital expenditure. This coupled with rising trade receivables and inventory levels could exert pressure on the company’s current rating if not checked.