Resilient as rubber

THE world’s largest condom maker is raising prices, but it has no worries about consumers turning away.

With surging costs, Karex Bhd is hiking prices by as much as 30%. However, it is expecting sales volumes to jump just as sharply, even after passing on the extra costs.

The Main Market-listed group expects demand to grow by around 30% this year, even as it implements price hikes across its range of condoms, personal lubricants, probe covers and catheters.

Karex chief executive officer Goh Miah Kiat says the company has little choice but to pass on higher input costs, due to persistent volatility in raw materials, logistics and production expenses.

“This cost pass-through to our customer is unavoidable,” Goh, 48, notes in response to StarBiz 7 queries.

Still, he said that whether these increases are reflected at the retail level ultimately depends on distributors and retailers, although it is likely they will be passed on to end consumers to preserve margins.

He adds that pricing will continue to be reviewed if cost pressures persist, noting that increases have been particularly sharp across key inputs, including nitrile latex (up more than 100%), natural rubber latex (over 30%), silicone oil (more than 30%), aluminium foil packaging (more than 20%), and certain materials in personal lubricants (up to 120%).

Despite the cost pressures, Goh says production at Karex is expected to remain stable in the coming months, supported by sufficient raw material inventory.

Goh emphasises that condoms remain an “essential public health commodity with limited substitutes,” helping to underpin resilient demand even in a higher price environment.

Against this backdrop, he expects demand to persist, driven by ongoing mismatches in supply and demand conditions, as well as increased usage during uncertain economic periods.

“With the mismatch in demand and supply chain, Karex, with its current operation, is able to and will continue to increase output to meet this rising demand,” he says.

Karex operates three factories in Malaysia, in Port Klang, Pontian and Senai, besides a plant in Hat Yai, Thailand.

The group runs 55 production lines, with a total annual dipping capacity of between five billion and 5.5 billion condoms.

It accounts for about 20% of global condom supply, effectively producing one in every five condoms worldwide.

More than 95% of revenue is export-driven, with only about 5% coming from the Malaysian and Thai markets.

The Americas remain its largest market at 48% of revenue, followed by Europe (26.9%), Asia (20.8%) and Africa (4.3%).

Goh said demand is largely driven by population size and sexual health awareness across markets, as Karex exports to over 150 countries.

“The regions that are currently driving demand would be countries such as the United States which have well developed sexual health education levels as well as countries with large populations like Brazil and Mexico,” he adds.

However, he notes that the structure of demand has evolved in recent years.

He says there has been a gradual shift away from large-scale government procurement towards private-sector driven sales, which typically involve smaller order sizes but greater product variety and more complex packaging requirements.

“Although we are not producing as large a number of condoms these days, suffice to say that our utilisation rates, when measured using packaging and testing capacity utilisation, is near full at over 80% of our current capabilities,” he notes.

The operational resilience comes against a challenging financial backdrop.

For the financial year ended June 30, 2025 (FY25), Karex’s revenue slipped 1.9% to RM498.41mil from RM507.85mil a year earlier, weighed down by unfavourable foreign exchange movements and weaker tender market sales following a reduction in United States humanitarian aid funding.

Net profit, however, plunged 99% to just RM208,000 from RM23.44mil in FY24, affected by higher operating costs and margin compression.

The pressure has extended into the current financial year.

For the first half ended Dec 31, 2025 (1H26), Karex’s revenue rose 5.7% year-on-year to RM255.67mil from RM241.91mil previously, driven largely by stronger contributions from its core sexual wellness segment.

Revenue from the sexual wellness segment, which includes sale of condoms and personal lubricants, increased to RM234.27mil from RM217.99mil a year earlier, continuing to account for the bulk of group turnover at over 90%.

In contrast, the medical segment, comprising sale of catheters, probe covers as well as HIV and pregnancy test kits, saw revenue decline to RM13.88mil from RM17.57mil, while the “others” segment rose to RM7.53mil from RM6.36mil.

Despite the higher revenue, profitability weakened, with net profit for the period falling 53.1% to RM7.14mil from RM15.23mil in 1H25.

The decline was mainly dragged by the sexual wellness segment, where net profit dropped 38.5% year-on-year, reflecting margin compression amid rising input costs, which had already set in even before the US-Iran conflict escalated.

Kenanga Research flagged that Karex’s 1H26 net profit of RM2.9mil came in below expectations, accounting for only 12% of full-year forecasts.

It has since cut FY26 and FY27 earnings forecasts by 65% and 33% respectively, citing weaker-than-expected margins.

The research house said margin normalisation depends on the success of repricing initiatives and operational recovery.

“The pace of margin recovery will depend on the effectiveness of repricing efforts and the gradual normalisation of operations,” it notes.

“Overall, earnings visibility remains mixed pending clearer signs of margin stabilisation.”

On the share price, Karex has declined nearly 30% from a year ago to around 54.5 sen at press time.

The stock hit a recent low of 46.5 sen on March 9, amid heightened geopolitical tensions following the escalation of the US-Iran conflict in late February.

At current levels, the stock is trading at a blended price-to-earnings ratio of about 28.5 times, above its historical average of 22.2 times.

Based on Bloomberg data, two out of five analysts covering the stock have a “buy” call, while the remaining maintain a “hold” recommendation, with a 12-month consensus target price of 69 sen.

Karex was listed in 2013 at an initial public offering price of RM1.85 per share, raising about RM74.9mil and implying a market capitalisation of roughly RM499.5mil at the time.

It currently has a market value of about RM574.1mil.

The key question now is whether Karex can translate resilient demand, even in the face of higher prices, into a sustained recovery in margins.