The Zicom Group Limited (ASX: ZGL) share price has rocketed 66.7% higher today on news the equipment manufacturer has entered the surgical mask game. Zicom Group announced that it will leverage its in-house engineering and manufacturing experience to design and build its own production line to manufacture masks.
What does Zicom Group do?
Zicom is a manufacturer of marine deck machinery, hydraulic system services, concrete mixers, foundation and geotechnical equipment, and fluid metering stations. With most of its customers in the capital goods business, many have held back buying decisions due to current uncertainty, adversely impacting Zicom’s revenues. There has been a slump in the offshore marine sector and the precision engineering and technologies sector has not been spared the impact of the trade war.
Why the pivot into face masks?
Zicom Group says the move into face masks is part of its corporate social responsibility obligations, given global shortages. The company can leverage internal experience manufacturing medical technology as well as the short term availability of manpower due to COVID-19 lockdown measures. Having built its own production line, the company has entered production within 3 months of conception.
Initial capacity allows Zicon to produce 3 million surgical masks a month. The masks have been approved by regulatory authorities in Australia and Singapore, with European regulatory approval expected in the next few weeks. US approval is expected within the next 3–4 months. The focus is on producing high quality surgical masks to provide protection to healthcare personnel and the general public. Zicom says this distinguishes its product from ordinary face masks being sold widely.
What’s next for Zicom?
Zicom says growing demand for high quality surgical masks has convinced it of the long-term commercial feasibility of its latest project. Soft launch has just been initiated, and has apparently shown an encouraging pick up in sales.
Zicom has decided to develop and potentially expand this new business and is confident it will generate recurrent revenue to supplement the capital goods business. This will no doubt serve as a relief to investors after first half revenues fell 40%, leading to a $4.2 million loss for the period.
The Zicom share price soared by almost 67% today, to close trade at 7.5 cents per share.
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Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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