Top Glove aims to improve performance despite expected market challenges

glovesMalaysian rubber glove manufacturer Top Glove Corporation, the world’s largest rubber glove producer by volume, is aiming to improve its performance in the coming months despite the expected challenges in the market as higher input costs drag its fiscal second-quarter net profit lower by 20.6% from a year earlier.

The company said net profit for the three months ended February 28 totalledRM83.05 million (US$18.72 million) declining from RM104.61 million in the same quarter last year. Quarterly revenue, however, rose 22.7% year-on-year to RM851.54 million from RM693.86 million thanks to higher sales volume, the company informed the stock exchange.

“Looking ahead, the group expects the business environment to be increasingly challenging, with competition intensifying on a larger scale,” the company said. “We aim to do even better and will continue to strengthen our glove quality, costing and competitiveness in the coming quarters.”

The average price of latex, the main raw material used in manufacturing of natural rubber gloves, had surged to a five-year high of RM5.95 per kg between December and February. That was a 72% increase on a year-on-year basis and a 33% gain when compared to three months earlier.

Meanwhile, the average price for nitrile – the main ingredient used in the production of synthetic gloves – climbed 12% to US$1.08 per kg from a year earlier and 10% when compared to September-November quarter.

“Top Glove is of the view that raw materials prices will stabilise at current levels or possibly be on the downtrend going forward,” the company said.

Prices of both latex and nitrile however have declined in recent weeks and will likely be lower for the fiscal third-quarter, said Top Glove’s Executive Chairman Lim Wee Chai.

For its fiscal first half, net profit plunged 33% to RM156.37 million from RM232.96 million in the same period a year earlier. Six-month revenue rose 10% year-on-year to RM1.64 billion from RM1.49 billion.

The company plans to raise capital expenditure to between RM250 million and RM300 million this fiscal year from about RM210 million spent last fiscal year, Lim said.

Top Glove will add one more factory to its initial plan of building two factories, he said. By December 2018, the company could operate 28 factories with 632 production lines, cranking out up to 60 billion pieces of glove a year, Lim added.

Lim also reiterated the company’s goal of acquiring a smaller rival by the end of August as part of its ambitious target of capturing 30% global market share. However, Top Glove will consider joint venture with “supporting industries” if the company fails to clinch a deal, he added.