Top Glove shares sink after US seizure order over forced labour
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A worker inspecting gloves at a Top Glove factory in Shah Alam on the outskirts of Kuala Lumpur last year.
PHOTO: AGENCE FRANCE-PRESSE
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KUALA LUMPUR/WASHINGTON • Top Glove shares sank after the US Customs and Border Protection (CBP) ordered personnel at US ports of entry to seize its gloves made in Malaysia, putting pressure on the world's biggest glove maker to improve its labour practices.
The stock fell 5.4 per cent in Kuala Lumpur yesterday to the lowest close since March 2, the biggest decliner on the main equities gauge. Trading volume was 145 per cent of its three-month average. The shares have plunged 50 per cent from an October high.
The move is a blow to Top Glove and comes as Malaysia's main industries - palm oil and gloves - grapple with intense scrutiny over poor labour practices. Top Glove, which is seeking a listing in Hong Kong to bolster its profile with overseas investors, was one of the biggest winners of the global pandemic for much of last year until vaccine roll-outs sapped its appeal.
The CBP Office of Trade, in consultation with the Treasury Department, said on Monday that it imposed the penalties against the Malaysian firm after having found "sufficient information to believe that Top Glove uses forced labour in the production of disposable gloves". The order expands a directive last year banning imports from two units of the company.
The Withhold Release Order that CBP issued in July last year was based on reasonable but not conclusive information that multiple forced labour indicators exist in Top Glove's production process, it said.
"Today's forced labour finding is the result of a months-long CBP investigation aimed at preventing goods made by modern slavery from entering US commerce," Mr Troy Miller, a senior official performing the duties of the CBP Commissioner, said in a statement.
North America accounts for 22 per cent of Top Glove's total sales volume, Kenanga Investment Bank said in a report dated yesterday.
Factories belonging to Top Glove were found to be a major source of Covid-19 infections in Malaysia last year. The government in November ordered the company to shut 28 of its factories in phases after discovering thousands of new cases there, and carried out raids on its dormitories. Its workers hail from countries such as Bangladesh and Nepal.
Top Glove said in a statement yesterday that its US counsel is liaising with CBP representatives to get more clarity and information. It is unable to ascertain the quantum on financial and operational impacts arising from the order, it added. The company also said a report prepared by an independent international consultant to CBP earlier this month viewed that "further progress" has been made and considering Top Glove's ongoing actions, the findings did not amount to systemic forced labour.
The news is an "unfortunate negative" and results in "cloudier earnings certainty and negative investor sentiment", Mr Gan Huan Wen, an analyst at Hong Leong Investment Bank, said in a report dated Monday.
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