Top Glove posts first quarterly loss since listing, raises glove prices amid challenges

GLOVE manufacturer Top Glove Corporation posted its first quarterly net loss since the company’s Malaysia listing in 2001 amid mounting cost pressures and a pullback in demand.

On Tuesday (Sep 20), Top Glove reported a net loss of RM52.6 million (S$16.3 million) for the fourth fiscal quarter ended August, reversing from a net profit of RM447.4 million in the corresponding year-ago period. 

Revenue for the quarter was down 52.3 per cent year on year to RM990.1 million from RM2.1 billion. The board did not propose a dividend for the period under review. 

In a call on Tuesday to discuss the company’s financial results, Top Glove executives said the glove industry is now facing several headwinds. The company also said it will defer its new expansion plans to align with glove demand and supply. 

On the supply side, there is currently an oversupply in the glove industry due to the “aggressive expansion” from existing players over the past 2 to 3 years. New entrants to the industry have also contributed to the oversupply, said managing director Lim Cheong Guan. 

There has also been a correction in demand for gloves, due to excess stockpiling by customers. Some customers have also adopted a “wait and see” approach in anticipation of a further decline in average selling prices (ASPs), he said. 

Lim was quick to stress that the declines in topline and bottomline figures are part of the “nature of the (glove sector’s) business”. Top Glove has anticipated this, and is working on several cost conservation and resource optimisation levels. 

Glove ASPs have already fallen off their pandemic highs, and the drop in prices has forced Top Glove to write down its inventory value to net realisable value by RM56 million in Q4 2022 and by RM229 million for FY2022. 

Among the company’s 4 types of gloves, surgical gloves was the only type which saw an increase in ASPs for Q4 on a quarter-on-quarter basis. Demand for this glove type held steady and rose after the Covid-19 pandemic due to the resumption of elective surgeries. 

Meanwhile, ASPs for nitrile gloves and natural rubber gloves fell by 10 per cent and 6 per cent respectively over the same period, while prices of vinyl gloves were down by 5 per cent. The sales volume of all 4 glove types fell on a quarter-on-quarter basis. 

Costs have also risen, further crimping margins for the company. Domestically, Top Glove was affected by an estimated 60 per cent hike in natural gas tariff over the course of FY2022, and a 25 per cent increase in the Malaysian minimum wage from RM1,200 to RM1,500 which took effect in May 2022.

The fall in ASPs and spike in costs mean glovemakers like Top Glove “can’t continue to lose money”, said executive chairman Lim Wee Chai. In October, Top Glove hiked its selling price by 5 per cent. 

“We need an initiator to start raising prices,” he added, noting that other players might follow suit and increase prices as well. He added that the company did face “some resistance” from its customers after the price increase. 

For now, Top Glove does not have plans to raise funds from markets, said managing director Lim. He noted that the group also has banking facilities that it “can draw on if there is a need”. 

A company spokesperson told The Business Times that the company’s upward price revision, declining raw material prices and a stronger US dollar will help the group return to profitability. 

“ASPs are bottoming out, and there should be no need for further writedowns if the price continues to stabilise. Hence, we should see an improvement next quarter,” the spokesperson added. 

Shares of Top Glove, which are dual-listed in Singapore and Malaysia, fell S$0.005 or 2.3 per cent on the Singapore Exchange to close at S$0.215, while shares ended flat at RM0.70 on the Bursa.