PETALING JAYA: The global demand for rubber gloves has been exponential since the outbreak of Covid-19 pandemic. This has shored up the fortunes of many glove makers.
Malaysia is expected to supply about two-thirds or 220 billion units of rubber gloves to meet the global demand of 330 billion units this year.
Riding on that demand curve are several Malaysian glove makers, including Top Glove Corp Bhd. Top Glove has been standing tall for several years as the world’s top producer of rubber gloves.
Financially, its revenue growth has been robust, growing from RM2.5bil in 2015 to RM7.24bil as at financial year ended Aug 31,2020.
During the same period, net profit grew from RM280mil to RM1.79bil, earnings per share (EPS) rose 0.04 sen to 22 sen, and market capitalisation swelled RM41.7bil to RM71.18bil respectively.
Since its listing in 2001, it has paid out a hefty RM2.53bil in dividends.
Its share price since listing has been more than the 10 bagger most investors yearn for.
But the company has come under the spotlight for reasons which some claimed could have been avoided.
In July, the US Customs and Border Protection placed a detention order on the disposable gloves produced by its subsidiaries on suspected forced-labour practices at its units. The company is making improvements on that score.
Recently, many of its workers, mostly migrants, have caught the Covid-19 bug.
This forced some of its factories to be shut.
The move could potentially disrupt its supplies, although Top Glove has assured otherwise.
Being in close contact at its dormitories has infected more workers and now it may face penalties for potentially violating the Workers’ Minimum Standard of Housing and Amenities Act.
Employees, be they locals or migrants, are assets of an organisation. As without them, producing goods that can be sold globally would be impossible, and the possibility of earning large profits would be gone.
Migrant workers leave their homelands in search for a better life. But more often than not, they are housed in cramped units and paid low wages.
This is not the only company that has come under the spotlight for violating labour practices.
In fact, with growing activism, consumers prefer companies that put environmental, social and governance (ESG) concerns at the forefront.
What Top Glove is facing is a wake-up call for many corporations as many flout the laws in a bid for higher profits.
PwC, in a recent report, said companies that still consider environmental and social impacts separately from profits would find it difficult to survive in the coming decade.
AmInvestment Research said the latest development could potentially raise the perceived risk premium of Top Glove.
It could reduce the price-to-earnings valuation to 25x from 28x.
Trust and transparency are embedded and companies should be aware that once there is erosion in trust and lack of transparency, it will take a long time to rebuild it.
PwC said Malaysian industries that are involved in the global supply chain must prepare themselves to be sustainability-ready so that they can future proof their footprint globally. Failure to comply may result in their products or services being denied entry into certain markets.
Top Glove says it adheres to ESG practices and this could be a blip in its journey. As the cover of its 2020 annual report suggests “doing well by doing good’’ – it will need to quickly address the issues at hand to surge ahead.
Top Glove’s shares fell 11 sen to RM6.68 yesterday.