KUALA LUMPUR: Top Glove Corp Bhd, which posted a net profit of RM15.29mil in the third quarter ended May 31 (3Q22), expects the challenging business environment to persist in the near term.
However, the glove maker emphasised that the situation is a temporary setback.
“In business, we always take a long term view. Top Glove believes that the outlook for the glove industry is still promising as gloves remain an essential item in the healthcare sector.
“We are very confident that demand will keep growing with increased usage from emerging markets where the glove consumption base is relatively low, coupled with higher levels of hygiene and health consciousness in a post-pandemic era,” managing director Datuk Lee Kim Meow said in a statement.
The group also recognises that challenges are part of doing business and has successfully weathered several such cycles since commencing operations 31 years ago.
“As external factors are beyond our control, we continue to focus on internal factors, the most fundamental of which is staying fit and healthy, so that we remain sustainable through the toughest of times. This will enable us to prepare for better times ahead,” Lee sid.
Top Glove’s revenue in the third quarter quarter fell to RM1.46bil from RM4.16bil a year prior.
Its profit of RM15.29mil in 3Q22 was significantly lower compared with RM2.04bil posted in the same period last year.
This is in contrast to the exceptionally strong performance in the corresponding periods of FY21 when the pandemic was at its peak, during which time demand and average selling prices (ASP) were at an all-time highs and operating costs were lower.
In the first nine months to May 31, Top Glove posted a net profit of RM288.56mil, down 96% from RM7.26bil a year earlier while revenue dropped 69% to RM4.5bil against RM14.28bil achieved last year.
Top Glove said the softer performance occurred amidst a convergence of headwinds, with production costs moving upward due to global inflation and as the Russia Ukraine conflict drove up crude oil prices.
Additionally, the group contended with increases in natural gas and electricity tariffs, as well as minimum wage implementation which came into effect May 1, 2022.
“The escalating costs resulted in margin compression, as the group was unable to fully pass cost through amidst the ongoing oversupply situation.
“However, ASPs are declining at a far slower pace which will help cushion the cost impact going forward. Meanwhile, sales to the USA from Malaysia continue to trend higher in 3Q22, increasing by 8% compared with 2Q22, with great potential for further growth, which bodes well for the group,” it said.
The average natural latex concentrate price rose 17% quarter on quarter to RM6.50/kg in 3Q22 while the average nitrile latex price was US$1.11/kg, 3% lower compared to 2Q22.
“In consideration of the moderating demand, the group has deferred and reduced its major capital expenditure for the immediate term, as it continues to align its expansion plans with market conditions,” it said.
Lee said this is an extremely challenging time for the glove industry and this quarter’s results are not reflective of its usual business performance, owing to the ongoing normalisation trend coupled with demand-supply imbalance.
“However, we will press on and continue focusing on the fundamentals: delivering
quality products at an efficient cost, a direction which remains our priority both in good and lean times,” he added.
Meanwhile, Top Glove will be launching its sustainability policy, which articulates its key focus areas and goals across the sustainability spectrum through FY2025.
Developed in consultation with various stakeholders, including investors, nongovernmental organisations and analysts, the policy serves as a guide to ethical and responsible sourcing and procurement for the group, as well as its supply chain.
“Significantly, by FY25, Top Glove has committed to setting a target year by which to achieve its Net Zero Carbon aspirations. The group also aims to attain 70% traceability to natural rubber plantations by FY25,” it said.