TOP Glove Corp Bhd has posted a 82.5% quarter-on-quarter (qoq) slump in its net earnings for 3Q FY8/2022 ended May 21, 2022 to RM15.29 mil (2Q FY8/2022: RM87.55 mil; 3Q FY8/2021: RM2.04 bil) while its revenue came in flat at RM1.46 bil (2Q FY8/2022: RM1.45 bil; 3Q FY8/2021: RM4.16 bil).
For its 9M FY8/2022, the group amassed net earnings of RM288.56 mil from RM273.27 mil recorded in the previous quarter (9M FY8/2021: RM7.26 bil) while revenue stood at RM4.5 bil (6M FY8/2022: RM3.03 bil; 9M FY8/2021: RM14.29 bil)
The world’s largest glove maker attributed the softer performance during the period under review to a convergence of headwinds with production costs moving upward due to global inflation and as the Russia-Ukraine conflict drove up crude oil prices.
Additionally, the group had to contend with increases in natural gas and electricity tariffs, as well as minimum wage implementation which came into effect May 1.
The escalating costs resulted in margin compression as the group was unable to fully pass cost through amidst the ongoing oversupply situation.
However, average selling prices (ASPs) are declining at a far slower pace which will help cushion the cost impact going forward, according to Top Glove.
Meanwhile, its sales to the US from Malaysia continue to trend higher in 3Q FY8/2022, rising by 8% compared with 2Q FY8/2022 with great potential for further growth which bodes well for the group.
For 3Q FY8/2022, the average natural latex concentrate price rose 17% qoq to RM6.50/kg while the average nitrile latex price was US$1.11/kg or 3% lower from 2Q FY8/2022.
In consideration of the moderating demand, the group said it has deferred and reduced its major capital expenditure (capex) for the immediate term as it continues to align its expansion plans with market conditions.
Outlook-wise, Top Glove expects the challenging business environment to persist in the near term but emphasises that the situation is a temporary setback.
Expressing optimism in prospects both for the group and the sector, its managing director Datuk Lee Kim Meow expects the outlook for the glove industry to remain promising as gloves remain an essential item in the healthcare sector.
“We are very confident that demand will keep growing with increased usage from emerging markets where the glove consumption base is relatively low, coupled with higher levels of hygiene and health consciousness in a post pandemic era,” he pointed out.
The group further recognises that challenges are part of doing business and has successfully weathered several such cycles since commencing operations 31 years ago.
“As external factors are beyond our control, we continue to focus on internal factors, the most fundamental of which is staying fit and healthy so that we remain sustainable through the toughest of times. This will enable us to prepare for better times ahead,” he added.
At the close of today’s mid-day trading, Top Glove was up 4 sen or 3.39% to RM1.22 with 26.49 million shares traded, thus valuing the company at RM10.01 bil. – June 9, 2022
