Top Glove says return to profit may take up to a year; Q1 loss more than triples as pandemic wanes
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Top Glove has been battling a number of challenges, including lower demand, average selling prices and stiff competition.
PHOTO: AFP
Uma Devi
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SINGAPORE – Glove manufacturer Top Glove could take up to a year to return to profitability, its founder and executive chairman Lim Wee Chai said on Wednesday, after the group posted a net loss of RM168.2 million (S$51.8 million) for the first quarter ended November.
Losses for the quarter were more than triple the net loss of RM52.6 million in the previous quarter, and a reversal from earnings of RM185.7 million in the year-ago period.
Mr Lim estimated that Top Glove’s losses will narrow in the next three months, adding that the group should break even six months from now, but that profitability would come only nine to 12 months later.
The company, which was raking in record-high profits during a large part of the Covid-19 pandemic, has been battling a number of challenges, including lower demand, average selling prices and stiff competition.
Top Glove executives said they have observed an “aggressive price competition” in the industry.
Glove manufacturers exiting the market are selling gloves at an “exceptionally low” price, which has caused price disruption.
Mr Lim noted that Chinese glove manufacturers are also cutting the prices of gloves to as low as US$14 (S$19) per 1,000 gloves.
In comparison, prices were higher than US$100 per 1,000 gloves when the coronavirus pandemic was raging.
To cut losses, these glove manufacturers are also reducing their utilisation rates to below 50 per cent, and have been using technology to speed up production.
Top Glove will not be able to sell its nitrile gloves – save for its old stock – at such a low price, said Mr Lim.
Its revenue for the period was down 60.7 per cent to RM632.5 million from RM1.6 billion, the company said.
Sales volume for the first quarter eased roughly 48 per cent.
On the demand end, the company is battling weak market demand across all regions and the ongoing correction in the mismatch between glove demand and supply.
Customers have no urgency to place bigger orders, and are also holding off restocking activity as they continue to deplete their existing glove inventories.
Mr Lim said the supply-demand imbalance will take about six months to normalise, and average selling prices are already near rock bottom.
Top Glove has also taken cost-cutting measures to protect its margins.
Its executive director Ng Yong Lin said the group has pulled all its capital expenditure for financial year 2023, and will focus on “optimising costs by rationing resources at production facilities”.
The company is now focusing on running its newer and more efficient factories, while temporarily shutting down the older and less efficient ones, he said.
On the issue of dividend payouts, managing director Lim Cheong Guan said Top Glove remains committed to its existing dividend policy of a payout of 50 per cent of earnings.
The company intends to resume paying out dividends when it returns to profitability, and treasury shares are also one avenue it can consider, he said.
Top Glove shares closed 6.25 per cent lower at 22 cents.
