VIP Gloves encouraged by +200% growth in average selling price of gloves for peer

VIP Gloves Ltd (ASX:VIP) is encouraged by the market trends in the glove industry with the average selling price of gloves for its peer Top Glove (KLSE:TOPGLOV) growing 201.8% year-on-year for the quarter ended November 30, 2020 (1QFY21). Thanks to margin expansion and better economies of scale, Top Glove’s 1QFY21 EBITDA margins rose 54.1% year-on-year (yoy) to 70.2%, despite higher raw material prices (nitrile latex: +24% yoy, natural rubber: +18% yoy). Dividend policy Top Glove has also declared its first interim dividend of 16.5 sen per share. This represents a 56% payout (50% usual dividend policy + 6% special). Interestingly, VIP recently revealed a higher dividend policy, to payout between 20% and 40% of earnings before significant items, subject to the company's financial position. This will be payable as cash dividends to holders of VIP shares. The dividend policy is effective immediately with the first dividend payable after finalising the consolidated financial statements of the company for the six months ending December 31, 2020. New production facility VIP’s sales order book for nitrile gloves has increased and is currently full for delivery up to the end of 2021. To fulfil its existing sales orders and to enable the company to commit to new orders, VIP is urgently pursuing completion of the installation of new production lines. Progress for the installation of new production lines is progressing well, with lines 5 and 6 targeted to be completed by December 2020, with lines 7 and 8 due to be completed by April 2021.