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Top Glove Q4 net profit soars 1,646%, expects 'fresh highs' in FY21

TOP Glove Corporation booked record profit and revenue figures for the fourth quarter ended August amid a surge in demand for gloves as a result of the Covid-19 pandemic, and is now looking forward to "fresh highs" in FY21.

Net profit for the quarter came in at RM1.29 billion (S$423.8 million), some 1,646 per cent higher than the net profit of RM74 million in the year-ago period. This lifted the group's FY20 net profit to RM1.87 billion, which is more than quadruple the profit of RM364.7 million in FY19.

Top Glove also reported quarterly revenue of RM3.1 billion, up 162 per cent from RM1.19 billion in FY19. The group noted that demand growth for the quarter was especially strong in Asia, Western Europe and Eastern Europe, which saw year-on-year increments of 110 per cent, 73 per cent and 64 per cent respectively.

The company's monthly order book has risen 150 per cent from pre-Covid-19 days, while lead time for delivery currently stands at about 400 days compared to 40 days before the outbreak.

Segmentally, the demand for nitrile gloves increased 31 per cent from the previous year, while natural rubber examination gloves booked a 7 per cent rise.

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Top Glove also benefited from higher average selling prices (ASPs) that were adjusted upwards to reflect market demand.

Bottomline figures were also boosted by productivity enhancements such as utilisation levels close to 100 per cent, which allowed the company to amplify its production efficiency and reap superior economies of scale. This had also helped to lower overhead costs such as labour and natural gas significantly, said Top Glove.

Operating expenses increased by 36.4 per cent to RM1.5 billion from RM1.1 billion in the corresponding period last year.

On the cost side, raw material prices remained mixed. The group noted that the average price for natural latex concentrate inched up 2.3 per cent to RM4.43/kg, while the average nitrile latex price slipped 13.3 per cent to US$0.98/kg.

Earnings per share for the quarter increased to 15.82 sen from 0.95 sen last year.

Top Glove's board has recommended a final dividend of 8.5 sen per share, bringing the company's total dividend payout for the fiscal year to 11.8 sen per share. The total dividend for the year represents an increase of 373 per cent from FY19, and translates to a net profit payout ratio of 51 per cent, the group said.

On July 20, Top Glove had proposed a two-for-one bonus issue that would see up to 5.48 billion bonus shares issued to shareholders whose names appear in the company's record of depositors on an entitlement date that has yet to be determined. The board of directors was of the view that the proposed bonus issue is the most appropriate avenue to reward existing shareholders while enhancing the company's capital base.

As at end-August, Top Glove was in a net cash position of RM2.34 billion. The group said this would allow the funding of ongoing organic capital expenditure, dividend payment, future merger and acquisition activities, as well as the acquisition of land banks for business expansion.

Looking ahead, Top Glove said it will continue to expand its capacity in order to ensure the company is well-positioned to fulfil the demand for gloves globally, which is expected to grow from a pre-pandemic annual level of about 10 per cent to about 15 per cent on the back of increased usage in both the medical and non-medical sectors.

The company has also earmarked RM8 billion for capital expenditure (capex) from FY21-26, which is slated to provide the group with additional capacity of 100 billion gloves. This amount will be invested in new capacity and the enhancement of existing manufacturing facilities, among others.

Said Top Glove's executive chairman Lim Wee Chai: "Our unprecedented performance underlines the effectiveness of our ongoing technology-driven improvement initiatives, which focus on quality and cost efficiency, and which have enabled us to meet the increase in glove demand.

"With glove demand still on the uptrend, we believe our best days are still ahead of us."

Top Glove shares were trading at S$2.75 as at 3.21pm on Thursday, down S$0.25 or 8.3 per cent.

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