TOP Glove Corp Bhd’s net profit rose 1.2% year-on-year (YoY) to RM111.43 million in the first quarter ended Nov 30, 2019 (1QFY20), from RM110.06 million previously on a strong showing in the nitrile glove segment, which saw sales volume growth of 20%.
Ongoing technological advancements as well as automation and digitalisation initiatives which resulted in greater efficiency and quality control, also accounted for the improved profit.
“Meanwhile, increased nitrile capacity from ongoing organic expansion allowed the group to further grow sales, cater to larger customers and capture a bigger market share in the US, Western Europe and Japan.
“The improvements in the nitrile glove segment were offset by weaker contributions from the natural rubber and vinyl glove segment,” the company noted in a Bursa Malaysia filing yesterday.
Its earnings were also hit by an increase of almost 9% YoY in the price of natural rubber latex, coupled with stiff competition.
“Sales volume growth in the natural rubber segment was lower YoY following slower demand growth in developing countries compared to 1Q19.
“However, the group is confident that demand growth in developing countries will pick up going forward, driven by increased healthcare awareness arising from improved standards of living,” it said.
The group’s surgical glove unit Aspion Sdn Bhd’s positive profit position also contributed to overall bottom line, it added.
However, revenue for the world’s largest glove manufacturer fell 4.2% YoY to RM1.21 billion in 1QFY20 from RM1.26 billion previously, due to lower average selling prices (ASPs) and lower average raw material prices.
In line with the anticipated 10% yearly growth in global glove demand, Top Glove expects to add 178 production lines and boost the production capacity by 21.3 billion gloves per annum, representing an increase of 30.4% in capacity over the next two years.
By December 2021, it anticipates to have 861 production lines and a production capacity of 91.4 billion gloves annually.
Investments in existing line refurbishment and building new technologically advanced glove factories will continue, with newer factories to feature more automation and digitalisation initiatives.
“In addition, the group will continue to explore mergers and acquisitions and joint ventures, while also diversifying into rubber or healthcare-related businesses,” Top Glove added.
Plans are underway to establish a manufacturing and research centre of excellence — the group’s new state-of-the-art hub for research and development and product innovation — based in Banting, Selangor.
“We have begun the financial year ending Aug 31, 2020, on strong footing, which sets a positive tone for the rest of the year.
“While it may be challenging and competitive, the new year will also bring opportunities which we are excited to leverage,” Top Glove executive chairman Tan Sri Dr Lim Wee Chai said.
Shares of Top Glove closed 4.7% higher at RM4.66 yesterday, valuing the company at RM11.93 billion.
Source The Malaysian Reserve