Top Glove incurs maiden loss; momentarily cheapest Big Four glove stocks

PERHAPS “navigating a turbulent environment” is an understatement to describe Top Glove Corp Bhd’s maiden quarterly net loss of -RM52.59 mil for its 4Q FY8/2022 ended Aug 31, 2022 (4Q FY8/2021: RM447.4 mil) since its listing in 2001. Revenue for the final quarter slumped 52.1% to RM990.1 mil from RM2.07 bil.

The undesired, below par performance which triggered a “perfect storm” of normalising demand and average selling prices (ASPs) alongside increased production capacity has even dragged the stock price of the world’s largest glove makers to a historical low of 68 sen, making it the cheapest among the Big Four glove makers (behind Supermax Corp Bhd).

For the full financial year, Top Glove’s net profit nosedived 97% to RM235.97 mil (FY8/2021: RM7.71 bil) while its revenue edged down 66% to RM5.57 bil (FY8/2021: RM16.36 bil).

“The glove industry has been facing strong headwinds over the last year,” commented Top Glove’s managing director Lim Cheong Guan who replaced Datuk Lee Kim Meow with effect from Aug 1.

“The temporary oversupply situation and weaker demand has distorted the demand/supply mechanism and the group’s 4Q FY8/2022 performance is not reflective of our business or the sector’s true potential, both of which remain very promising in the longer term.”

“We have delivered exceptionally strong profits over the last two years and are now going through a period of normalisation as glove demand/supply stabilises. We accept this as part of being in the glove business, mindful that our loss position this quarter is a temporary setback, and are confident the industry will recover eventually,” he added.

Moving into 2023, Lim expects the business environment to remain challenging as customers continue to deplete pipeline inventories and glove demand/supply gradually equilibrates. However, the group believes that recovery is on the horizon.

“Based on our industry experience, a period of adjustment is to be expected after each pandemic. Owing to the ‘perfect storm’ of normalising demand and ASPs alongside increased production capacity, however, the recovery timeline is more protracted than usual,” he projected.

“However, we are optimistic that the storm will pass. Once the demand /supply mechanism re-balances, we will see glove demand resuming its 10% growth per annum as projected by the Malaysian Rubber Glove Manufacturers Association (MARGMA) in line with actual consumption which is underpinned by rising usage and hygiene awareness.”

At 4.50pm, Top Glove has rebounded by 0.5 sen or 0.71% to 71 sen with 103.21 million shares traded, thus valuing the company at RM5.83 bil. – Sept 20, 2022

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