PETALING JAYA: Malaysian companies have not been spared from rising energy and transport prices stemming from hostilities around the Strait of Hormuz, as businesses plan for how to pass on higher costs to consumers while managing their own capital and operating expenditures.
While some industries, such as mining and heavy chemicals, could benefit from elevated oil prices, most are hoping for the conflict to end sooner rather than later, in the hope of a return to greater stability in oil and energy prices.
For the world’s largest glove maker, Top Glove Corp Bhd
, managing uncertainty is nothing new.
The company believes its products remain essential for medical, healthcare and other critical sectors, while demand remains relatively resilient despite ongoing market volatility.
As the industry continues to face elevated costs – particularly for raw materials such as nitrile butadiene rubber, as well as chemicals, natural gas, utilities and logistics – the group says it has adjusted average selling prices (ASPs), allowing for cost pass-through in line with prevailing industry practice.
“At the same time, we are in regular communication with our customers to ensure transparency on cost developments. We also continue to work closely with suppliers to ensure stable raw material availability and pricing, while monitoring market developments to mitigate potential disruptions,” the company told StarBiz.
Top Glove observed that customer behaviour has normalised following the volatility during and immediately after the Covid-19 lockdowns.
While order visibility has also improved compared to the immediate post-Covid period, the company said customers have continued to adopt prudent inventory management practices.
Additionally, the group said it is currently operating at around 80% utilisation based on running capacity, reflecting a steady improvement in glove demand over the past year.
Top Glove added that it will progressively reactivate installed capacity of about four billion pieces of gloves.
“On cost optimisation, we continue to focus on improvements across our operations, which include automation, energy efficiency initiatives and process enhancements.
“These have been instrumental in strengthening our cost competitiveness, positioning us to benefit from higher utilisation levels,” it noted.
Nevertheless, Top Glove recognised that while ASPs have stabilised from post-Covid peaks, recent increases in raw material costs resulting from the Middle East crisis have led to upward price adjustments.
It said demand has grown considerably by around 40% over the past year.
This, on top of the high utilisation rate of 80%, has supported an improvement in margins.
Moreover, the group said its flexible production lines have enabled it to switch efficiently between natural rubber and nitrile gloves.
“This flexibility enables us to support customers in managing cost considerations by offering natural rubber gloves as an alternative when nitrile glove input costs are elevated,” it said.
In the longer term, Top Glove is anticipating margin recovery to be supported by a combination of higher utilisation, disciplined cost management, and continued focus on operational efficiency and product quality.
Meanwhile, GDEX Bhd managing director and group chief executive Teong Teck Lean confirmed that domestic express delivery has been affected by the war, with a reduction in delivery volumes.
“In addition, it has also become more costly for air freight as airlines have passed on fuel surcharges to us.
“So for international deliveries, as well as Sabah and Sarawak routes, we have had to impose additional surcharges to cover the higher costs,” he told StarBiz.
That said, he believes the impact on the group’s business is limited, as fuel costs for GDEX are still subsidised under fleet cards, which help ease the burden of rising diesel prices.
Moreover, Teong says most of GDEX’s air freight cargo into Malaysia comes from Saudi Arabia, as the group handles haj-related shipments.
“There have been some cost increases due to airline fuel surcharges, but operations are not affected.
“There has also been rerouting of air freight shipments due to the war, and margins will be slightly affected as we may not be able to pass on all the costs to customers,” he said.
A research head at a foreign brokerage pointed out that the most vulnerable sectors to rising energy and transport costs are generally those with thin margins, high input cost exposure, and limited pricing power.
“Export-oriented manufacturers, electronic manufacturing services players, consumer goods companies and certain construction firms fall into this category, as they face rising labour, logistics, and raw material costs while competing aggressively on price.
“Companies locked into fixed-price contracts are particularly exposed,” he said.
On the more resilient side, the research head said firms with strong branding, scale, or regulated earnings tend to fare better, pointing to names such as Nestle (M) Bhd and Fraser & Neave Holdings Bhd, which have historically demonstrated stronger pricing power.
Utilities and infrastructure concessionaires also benefit from more predictable cash flows.
“Large-cap industrial exporters with diversified operations and natural currency hedges are also relatively better positioned,” he said.
He opined that investors are rewarding companies that demonstrate discipline and adaptability rather than just top-line growth, adding that automation and operational efficiency remain key themes as they provide sustainable margin protection.
Diversified supply chains and regional manufacturing footprints are also increasingly viewed positively, especially for exporters exposed to trade disruptions, he noted.
“In addition, investors favour companies with strong balance sheets and prudent capital management, as these firms are better equipped to absorb temporary shocks.
“Pricing power remains one of the biggest differentiators – companies able to raise prices without significantly affecting demand are generally commanding stronger valuations in the current environment,” he said.
