KAREX BERHAD Navigates Headwinds: A Deep Dive into Q3 FY2025 Performance

Greetings, fellow investors and market enthusiasts! Today, we’re unpacking the latest financial report from KAREX BERHAD, a prominent Malaysian company known globally for its sexual wellness and medical products. Their interim financial report for the third quarter ended 31 March 2025 (3QFY2025) offers a mixed bag of results, showcasing resilience in the recent quarter but also revealing the persistent challenges impacting their year-to-date performance. One key highlight is the proposed interim dividend, signaling the company’s commitment to shareholder returns.

Let’s dive into the numbers and see what KAREX BERHAD has been up to.

Q3 FY2025: A Glimmer of Growth Amidst Challenges

KAREX BERHAD’s third quarter, ending 31 March 2025, saw a commendable increase in revenue compared to the same period last year. However, profitability faced pressure from rising operational costs and unfavorable exchange rates.

For the quarter, revenue grew by approximately 6.8%, primarily driven by stronger sales of condoms and personal lubricants. Despite this sales increase, the company’s profit before tax decreased by 20.8%, and profit after tax by 15.6%. This was largely attributed to the implementation of minimum wage increases in Thailand and Malaysia, heightened logistics costs stemming from trade disputes, and less favorable foreign exchange rate movements.

Quarter-on-Quarter Improvement

Compared to the immediately preceding quarter (Q2 FY2025 ended 31 December 2024), KAREX BERHAD showed significant sequential improvement:

• Revenue: Jumped by approximately 26.9% to RM135.7 million (from RM106.95 million in Q2 FY2025).
• Profit After Tax: Soared by approximately 59.6% to RM5.1 million (from RM3.19 million in Q2 FY2025).

This quarter-on-quarter recovery was mainly due to increased condom and lubricant sales to both the Commercial and Tender markets. The Commercial market refers to sales through retail channels and private brands, while the Tender market typically involves large-volume procurements by governments or NGOs.

Nine-Month Financial Performance: A Broader View

Looking at the cumulative nine-month period ended 31 March 2025 (9MFY2025), the picture is more challenging:

Despite improvements in personal lubricant sales and Commercial market growth, the overall decline in international Tender market orders significantly impacted the group’s sales for the nine-month period. Heightened volatility in foreign exchange rates, driven by global economic uncertainty, further compressed profitability margins.

Segmental and Geographical Performance

KAREX BERHAD operates primarily in three segments:

• Sexual Wellness: This segment, encompassing condoms and personal lubricants, saw its revenue decline from RM350.0 million in 9MFY2024 to RM341.2 million in 9MFY2025. Segment profit also decreased significantly from RM31.5 million to RM19.9 million.
• Medical: This segment, including catheters and test kits, showed positive growth, with revenue increasing from RM24.4 million to RM26.6 million, and segment profit more than doubling from RM1.7 million to RM3.7 million.
• Other Segments: This smaller segment also saw revenue and profit increases, albeit from a lower base.

Geographically, the Americas and Europe showed revenue growth, while Asia and Africa experienced declines for the nine-month period. The Americas remained the largest contributor, with revenue increasing to RM157.6 million (from RM150.6 million), and Europe growing to RM87.7 million (from RM68.2 million).

Financial Health and Cash Flow

As of 31 March 2025, KAREX BERHAD’s total assets stood at RM734.9 million, a slight increase from RM708.8 million at 30 June 2024. Total equity also saw a minor increase to RM484.6 million. The company’s net assets per share remained stable at RM0.46.

However, the cash flow statement reveals some shifts. Net cash generated from operating activities significantly decreased to RM13.16 million for 9MFY2025, compared to RM60.68 million in 9MFY2024. The company also increased its investment in property, plant, and equipment, with net cash used in investing activities rising to RM27.6 million (from RM17.1 million). Total loans and borrowings increased from RM120.3 million as of 30 June 2024 to RM135.6 million as of 31 March 2025, with a notable increase in current borrowings.

Risks and Prospects: Navigating the Future

KAREX BERHAD acknowledges the dynamic market landscape and outlines its strategies for the financial year ending 30 June 2025.

Strategic Outlook:

• The company aims to capture more high-value orders for both condoms and personal lubricants by leveraging its established reputation, unparalleled product variety, and regulatory expertise to export to a wide range of markets.
• Its award-winning economic, environmental, social, and governance (ESG) sustainability efforts are highlighted as a key differentiator, especially as more consumer brands prioritize supply chain sustainability.
• The global condom market is projected to grow faster than the global economy, driven by increased sexual health awareness and a shift from government procurement to private sector models. This trend favors larger manufacturers who have invested in modernization and innovation.
• The rise of e-commerce is also seen as a significant factor accelerating brand differentiation and market share gains.

Challenges and Opportunities:

While the shift between Tender and Commercial markets may disrupt traditional condom sales channels in the short term, KAREX BERHAD views this as a medium-term growth opportunity. Emerging trends, such as the consumer preference shift from natural latex to synthetic condoms in some markets, are also identified as exceptional opportunities to capture a larger share of value in the global condom market.

However, the report also implicitly points to ongoing challenges like volatile foreign exchange rates, global economic uncertainty, and geopolitical conflicts. Sustained improvements to profitability will depend on the successful execution of strategic projects while efficiently navigating these external uncertainties.

Dividend Announcement

In a positive move for shareholders, the Board of Directors proposed an interim dividend of 0.5 sen per ordinary share for the financial year ending 30 June 2025, amounting to RM5.27 million. This dividend is payable on 24 June 2025, with an entitlement date of 10 June 2025.

What Are Your Thoughts?

KAREX BERHAD is clearly at a pivotal point, adapting its strategies to a changing global market. Given the strategic shifts and market dynamics, do you believe KAREX BERHAD can effectively navigate these challenges and capitalize on emerging opportunities in the coming quarters?

Share your insights and perspectives in the comments section below. Let’s discuss!