Top Glove confident on outlook, expects sales volume to increase
09 Jun 2021
Top Glove Corp Bhd remains confident about the sector and the group’s prospects despite a downtrend in average selling prices (ASPs) due to weaker demand from the United States and lower raw material costs, with a return in US sales volume as a possible bright spot.
“We expect sales volume to increase 10-20% in Q4 from Q3, especially if we can get the US Customs and Border Protection to uplift the import ban earlier, then the volume growth can be bigger as well,” Top Glove managing director Datuk Lee Kim Meow told the media during the glove maker’s virtual briefing on its third-quarter 2021 (Q3’21) performance today.
While the management did not offer any estimates on the projected price downtrend, he revealed that the current order lead time ranged from 90 to 120 days, depending on glove types.
In January 2021, the group reported an average lead time of 300 days which subsequently shortened to 170 days in March. The pre-pandemic lead time stood between 20 and 30 days.
“In the past, our ASPs moved ahead of the others’. Right now, I think a lot of the other players’ ASPs have caught up with ours,” Lee said.
Moving forward, Top Glove sees a good opportunity in the tender business as it has a delivery time of one year or more and utilises the current ASPs.
With the improvement in the Covid-19 situation, particularly in the US compared with that three to five months ago, he believes gloves will remain as an essential item and various governments will be mindful of the need to stockpile the product.
The managing director pointed out that various developed economies in the Western world were caught unaware by the glove shortage at the onset of the Covid-19 pandemic.
“Since their cases have stabilised, I believe it is a good time for them to look into stockpiling gloves and the system that needs to be in place, whether it is three or six months’ inventory, to get themselves ready before the next situation.”
When asked about its competitors mulling an expansion to the US, Top Glove’s founder and executive chairman, Tan Sri Dr Lim Wee Chai, stated that it had weighed such options from time to time.
“When the glove prices were at their peak six months ago, such a move would have been viable but since then the price has come down so much, it is not cost effective to invest in the US to set up a glove factory,” he said.
Lim pointed out that 30 years ago, most glove factories closed their operations in the US and moved to Asia, particularly to Malaysia, Thailand and Indonesia. Given the current conditions, he does not see any good reason for glove manufacturing to move back to the US.
For its third quarter ended May 31, 2021, the group’s net profit soared almost six times to RM2.04 billion from RM347.9 million in the corresponding quarter of the previous year, attributed to continued demand spurred by the Covid-19 pandemic and higher ASPs. Revenue for the quarter stood at RM4.16 billion, a 147% jump from RM1.69 billion previously.
The third quarter of 2021 saw a 45% year-on-year increase in the natural latex concentrate average price to RM6.31/kg, while the nitrile latex price rose 138% to an average of US$2.31/kg.
For the nine-month period ended May 31, 2021, the group’s net profit stood at RM7.26 billion, a 12.6-fold increase from RM575 million reported for the same period of the previous year. Revenue for the period stood at RM14.29 billion, a 246% increase from RM4.13 billion previously.
The group declared a third interim dividend of 18 sen per share consisting of a 12.7 sen single-tier third interim dividend and a special single-tier third interim dividend of 5.3 sen per share. The interim dividend for the quarter amounted to a total payout of RM1.44 billion, payable on July 7.
Going forward, it anticipates raw material prices to be on a downtrend, which will benefit its business.
By Dec 31, 2024, the glove maker is projected to have a total of 60 factories comprising 47 glove factories and 13 other factories, comprising 1,512 glove production lines with a production capacity of 205 billion gloves a year.
Source: The Sun Daily