Glove demand to remain resilient


SHAH ALAM: The gradual decline in average selling prices (ASPs) for gloves will continue although global glove demand should remain resilient as glove usage continues to rise, driven by the ongoing Covid-19 pandemic.

This was said by Top Glove Corp Bhd executive director Lim Cheong Guan at a briefing on the group’s results for its third quarter ended May 31, 2021 (Q3).

On a quarter-on-quarter (q-o-q) comparison, Top Glove’s net profit and revenue dropped 29% and 22% respectively, which the group said was due to lower glove average selling prices (ASPs) which had peaked in February 2021.

Cheong Guan noted that on a q-o-q basis, ASPs for gloves had declined by 16% in line with market pricing trends, and the group also saw reduced sales to the United States, following a temporary halt in shipments from Malaysia in compliance with requirements of the US Customs and Border Protection’s (US CBP) withhold release order (WRO) on its products amid forced labour allegations.

Top Glove managing director Datuk Lee Kim Meow (file pic below) said the group would continue to work closely with the US CBP towards the expeditious revocation and modification of the WRO on its products amid forced labour allegations.

He noted that as of April 2021, Top Glove had resolved all 11 ILO (International Labour Organisation) forced labour indicators.

Meanwhile, the group’s US attorneys Benjamin L England and Associates had issued a letter dated June 3, 2021 stating that the US CBP was currently at the verification stage on this matter, and the attorneys were very hopeful for a speedy and favourable outcome.

Regarding growing competition in the glove-making sector, Top Glove executive chairman Tan Sri Dr Lim Wee Chai said new nitrile glove players may find it difficult going in the coming one to two years as the demand-supply situation normalises and ASPs decline.

“The glove business is international and very competitive.

“In the past 20 or 30 years, 250 glove factories were set up and 80% of them have closed down.

“The risk is high. It is very difficult to compete with the existing players unless you are extremely good, ” said Wee Chai, adding that the lead time (for glove delivery) had shortened to 30 to 50 days, depending on the type of products.

For Q3 of financial year 2021 (FY21), Top Glove posted a 485% year-on-year (y-o-y) surge in net profit to RM2.036bil while revenue jumped 147% to RM4.163bil.

The world’s largest glovemaker told Bursa Malaysia that strong sales were due to continued demand for gloves globally, driven by the ongoing Covid-19 pandemic while the surge in net profit came on the back of higher sales output, coupled with higher ASPs, which peaked in February 2021.

The sales volume also eased 4% q-o-q mainly due to reduction in sales to the US.

On a q-o-q basis, raw material prices were higher with average natural latex concentrate prices up by 8% from RM5.85 per kg to RM6.31 per kg, while nitrile latex price increased marginally by 0.4% from US$2.30 (RM9.47) per kg to US$2.31 (RM9.51) per kg.

“Going forward, raw material prices are expected to be on a downtrend, which will benefit the group.”

Regarding cost of production and raw material price trend, Wee Chai said he was expecting lower nitrile latex prices as butadiene and acrylonitrile are forecast to decline by 10% and 6% respectively from May to August 2021.

Also, lower natural rubber latex concentrate prices are expected with the wintering season ended in May 2021.

Meanwhile, Wee Chai noted that the natural gas tariff increased by 21% from April 1, 2021 to June 30, 2021 while electricity tariff was reduced by 6% from Jan 1, 2021 to June 30, 2021.

For the first nine months of FY21, Top Glove’s net profit jumped 1, 163% y-o-y to RM7.263bil while revenue surged 246% to RM14.287bil.

Earnings per share for Q3 was 25.44 sen (versus 4.39 sen a year earlier).

The group declared a third interim dividend of 18 sen per share, with the ex-date on June 23 while the payment date is July 7, 2021.

The total dividend payout for Q3 is 71%, consisting of a special dividend payout of 21% plus 50%.

The group’s net cash position as at May 31, 2021 was RM4.23bil.

Top Glove also stated that global glove demand is estimated to grow from a pre-pandemic level of about 10% per annum to about 15% per annum post-pandemic.

By end-2024, Top Glove is projected to have a total of 60 factories comprising 47 glove factories and 13 other factories, 1, 512 glove production lines and a glove production capacity of 205 billion gloves per annum.

As at June 9, 2021, the group had a total of 48 factories comprising 37 glove factories and 11 other factories, 812 glove production lines and a glove production capacity of 100 billion gloves per annum.

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