Top Glove earnings jump to record high


  • Corporate News
  • Friday, 12 Jun 2020

The net profit from this quarter itself was already close to the net profit for the group’s financial year 2019 (FY19) of RM370.56mil.

PETALING JAYA: The much-awaited results of Top Glove Corp Bhd, which has anchored a three-month fantastic run on all healthcare and glove companies, did not spring any surprises.

Perhaps what was more surprising is the confidence exuded by the glove manufacturer in trumping the record it has just set, in the upcoming quarters.

Top Glove said its net profit for the quarter ended May 31,2020, which was its all-time high, was not yet the best as it foresees better days ahead.

The group had just posted a massive 365.94% jump year-on-year in its net profit for the quarter from RM74.67mil to a historical high of RM347.9mil since the company was established in 1991.

The net profit from this quarter itself was already close to the net profit for the group’s financial year 2019 (FY19) of RM370.56mil.

This was due to the unparalleled growth in sales volume, where monthly sales orders spiked by around 180% on the back of the coronavirus (Covid-19) pandemic.

There was also an improvement in its average selling price (ASP) of 9% y-o-y and 5% quarter-on-quarter (q-o-q).

Its revenue saw a 41.85% y-o-y increase from RM1.19bil to RM1.69bil.

Group managing director Datuk Lee Kim Meow said further growth in sales will come from the United States, Mexico, Brazil and other Latin American countries.

He said the fear factor has driven many people to book capacity, which led to Top Glove’s lead time increasing tremendously, up from 40 days to around 400 days whereby orders placed now would only be delivered over a year later.

Lee expects that trend to continue as face masks and gloves were the most wanted items currently and based on the group’s experience from dealing with government bodies and embassies, they were prepared to pay a lot more to protect their citizens.

“Even non-governmental organisations (NGOs) like the World Health Organisation (WHO) are also spending a lot more for prevention purposes.

“Moving forward, we believe the trend will continue to be very strong. This momentum will carry on until the end of the year and beyond 2020 as well, ” he told a virtual briefing on the group’s results yesterday that was packed with more than 300 fund managers, analysts and journalists across the globe.

Lee also said the group had earlier expected the demand, which started to grow in January, to last only for a week or two but they then realised that the sales consistently became stronger over the weeks which extended to over the months.

He added that the spike in demand initially came in from China, which then expanded to Japan, South Korea, Singapore and Taiwan before spreading into Europe, particularly the northern region in countries like Germany, Spain, Italy and Turkey.

Top Glove recorded an exponential increase in sales order in those countries over the past month as compared to January, with Germany taking the lead at 572%.

Spain came in at 469%, Italy jumped 387% while orders from Canada and the US rose 242% and 147% respectively.

Group executive chairman Tan Sri Dr Lim Wee Chai said it was easy to do well during good times but in tough times, companies that continue to do well are those with a solid foundation. “Our record high results are a testament to our strong foundation which is decades in the making. It comprises a committed and capable team, as well as ongoing improvement initiatives in terms of automation, digitalisation, quality and cost efficiency.

“Gloves are an essential item in winning this war on Covid-19. It is a tremendous privilege to be in a position to help protect people in Malaysia and throughout the world from this dangerous virus and we will continue to work safely and efficiently to produce as many gloves as possible at this critical time, ” he said.On the ASPs, Lim said it will increase by 15% a month in the coming quarter starting June, followed by a further 15% each in July and August. As for spot sales, it will increase by 100% on average.

Asked about the results that the group is expecting to see for it FY2020, Lim said with their strong order book and with demand still higher than supply earnings could potentially double and revenue rise more than 30%.

Updating on the progress on the group’s mask production, Lim said production just began on Wednesday as they only received the machine a week ago.

He added that the masks were already pre-booked before production began and the profit margin was good.

Moving forward, Top Glove will expand its capacity to ensure it is well-positioned to fulfil global glove demand, which is expected to grow from a pre-Covid levels of between 8% and 10% per annum to between 12% and 15% per annum post-Covid, on the back of increased usage in both the medical and non-medical sectors, as well as heightened hygiene awareness

The group has earmarked RM3bil for capital expenditure to build 450 new lines which will create new capacities of 60 billion pieces of gloves from the calendar year 2020 (CY2020) to CY2026, the construction of the Top Glove Innovation Complex (TGIC) and a smart and digitalised manufacturing plant which will be completed by the second quarter of CY2022, which all future factories will be modelled after.

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