PETALING JAYA: The rubber glove sector will see a better performance next year as the demand and supply situation in the market is starting to see a balance.
Top Glove Corp Bhd executive chairman Tan Sri Lim Wee Chai said the oversupply situation has improved compared to the past two to three quarters.
“Most factories have slowed down on their expansions and the supply is now more balanced to the demand.
“We (Top Glove) will be better in FY20 than FY19. There is always a cycle but in the long term, it will be alright, ” he told StarBiz at theSeminar on Business Ethics and Integrity organised by the Federation of Malaysian Manufacturers (FMM) here yesterday.
The year 2019 has seen earnings of most rubber glove companies recording a declining trend year-on-year (y-o-y) but quarter-on-quarter (q-o-q) figures have been increasing.
The demand growth is about 10% annually and Lim said this makes rubber glove a very good industry but this will inevitably attract strong competition in the sector, making it a game of the survival of the fittest.
Because rubber gloves are mainly used in the healthcare industry, the improving standards of living and the increasing life expectancy and rising population are all boons for the industry.
“Over the past 20 to 30 years, around 250 glove factories were set up and around 200 were already closed. Most of the players now are fit and strong, although from time to time you may have some consolidation of merger and acquisitions.
“The industry is very healthy and it has good prospects, especially for Malaysia as it goes for industrialisation and becoming an advanced country, ” Lim said.
The world’s largest rubber glove manufacturer had just completed its 1QFY20 ended Nov 30 and Lim is confident that the group will achieve better results compared to the previous quarters.
The group has allocated RM600mil for its FY20 capital expenditure, which will focus on construction of new factories, machineries, automisation and digitalisation.
Commenting on reports that Top Glove risk being excluded from the benchmark FBM KLCI, Lim said the company has maintained its position in terms of the largest market capitalisation in Malaysia.
The counter, which closed at RM4.37 yesterday, ranked it 35th with a market capitalisation of RM11.19bil.
“In terms of our share performance since our listing in 18 years, we already grew about 7,000% and our CAGR in sales and profit is about 20% a year, making us one of the best performing companies in Bursa Malaysia, ” said Lim.
While labour shortage is among the challenges that industry players are facing, Lim pointed out that it is no longer cheap to employ foreign workers and the gap between the costs to hire a foreign worker and Technical Education and Vocational Training (TVET) graduate is getting closer.
Among costs that have to be borne by employers are the agency fees, hostel and transportation costs for the foreign workers.
“The rubber glove industry is facing a social audit from Europe and the United States where they are very strict on social welfare. They want to make sure that is no form of corruption and bribery and zero recruitment costs to the worker.
“The best is to go more on automation and digitalisation and this is where the industry has also improved a lot.
“Back then, a worker could generate around RM50,000 in revenue.
Now, it is RM250,000 to RM300,000 per worker, ” he said, adding that businesses would also prefer to hire TVET graduates due to their higher level of education.
Top Glove hires up to 1,500 fresh graduates every year, mainly engineers, chemists and scientists to undertake more researches.
urrently, the manufacturer’s ratio of foreign workers stands at about 60% to 70%, a slight improvement from the 80% to 90% level back then.
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