Top Glove Corp Bhd, the world’s largest rubber glove manufacturer by capacity, has no plans to exit the Chinese market, despite the group incurring an operating loss of RM5.23 million in China during the first quarter ended Nov 30, 2013 (Q1 FY14).
“We intend to maintain our presence in China. It is a huge market with a population of 1.35 billion and we do not want to miss out on the vast business opportunities available,” Top Glove founder and chairman Tan Sri Lim Wee Chai (pix) told SunBiz in an email interview.
He said the decision to scale back operations in China by shutting down one factory is to curb losses and is not a prelude to an eventual exit of the market.
The losses were attributed to a new Chinese government policy that limits the amount of coal used as a source of energy in industries.
Top Glove is in the midst of consolidating its operations at Factory 8 in Zhangjiagang into Factory 15 in Xinghua.
“Factory 15 will stay where it is and serve as our only facility in China for the foreseeable future. It has a sizeable parcel of land at its disposal, which can be used should there be a need for expansion,” said Lim.
He added that Top Glove will instead focus on increasing its market presence in China and identifying good partners to expand its market exposure and distribution channels.
“After the consolidation efforts, we are looking at breaking even and eventually for our China operations to start contributing positively again,” Lim said.
The shutdown of Factory 8 leaves Top Glove with a total of 25 factories, equipped with 464 production lines and glove production capacity of 41.3 billion gloves in a year. The glove maker has 20 factories in Malaysia, four manufacturing facilities in Thailand (two glove factories and two latex concentrate and processing plants) and a glove factory in Xinghua, China.
At the moment, the group’s scheduled expansion plans are mainly at home. The expansion of its existing facility (Factory 27) in Lukut, Port Dickson, as well as the construction of a new factory (Factory 29) in Klang are slated to be completed by May and August this year respectively.
By August 2014, Top Glove is expected to have 26 factories, equipped with 484 production lines and an annual production capacity of 43.3 billion gloves.
As at November 2013, Top Glove had a net cash position of RM187.9 million and zero net gearing. The group does not have plans to raise fresh capital from investors.
Lim said the Malaysian rubber glove industry still has the competitive advantage at the moment, but the gap is gradually narrowing.
“For us (Malaysia) to stay competitive in the global arena and to maintain the top position as the world’s largest rubber glove exporting country, we need to constantly improve on quality and bring cost down, but this will also require support from the government,” he said.
Currently, some 98% of Top Glove’s gloves are produced for the export markets.
“We are always on the lookout for new markets to expand into. Our focus will be on emerging markets where usage is relatively low but rapidly rising owing to increasing healthcare awareness and hygiene standards,” said Lim.
He said the group will concentrate on “quality” growth across all aspects of its operations, be it from recruitment, sourcing, to production.
“We are expanding our market share in emerging economies, as well as developing our upstream venture in rubber plantations,” he said.
In October 2012, the group acquired land in Indonesia for its upstream venture into rubber plantations.
Lim said his goal for Top Glove is not only for it to maintain its pole position, but to capture 30% of the global market share over the next few years. In addition, the group aims to become the world’s largest nitrile glove maker.
“We currently have 25% of the global market share and aim to increase this to 30%,” he said.
To achieve the targets, Lim acknowledged that both organic and inorganic growth will be required. “We are always open to merger and acquisition opportunities, particularly within the region and in Malaysia,” he said.
In December 2012, Top Glove bought over GMP Medicare Sdn Bhd.
Based on past trends, Lim expects Top Glove to maintain a growth pace of 10% to 15% yearly volume growth, driven by the on-going expansion initiatives. For instance, the group saw its sales volume grows by 18% in financial year ended Aug 31, 2013.
On recent corporate developments, Lim said construction of Top Glove Tower, which is aimed at meeting future office space requirements, is targeted to be completed in 2015.
Source: The Sun Daily
Published: 17 Mar 2014