Top Glove’s production running at 100 per cent, to increase ASP
KUALA LUMPUR: Top Glove Corporation Bhd’s (Top Glove) production is running at 100 per cent and hence, it expects to churn out higher volumes of its products as well as increase its average selling price (ASP) as demand surges.
Following a conference call between analysts and Top Glove’s management, Kenanga Investment Bank Bhd’s research team (Kenanga Research) said: “The group production floor is running at 100 per cent where 50 per cent of workers are running operation with two shifts.
“Additionally, the group is raising ASPs by three to five per cent or between US$0.30 to US$0.50 per thousand pieces which is not excessive per unit cost.”
Affin Hwang Investment Bank Bhd’s research team (Affin Hwang) said that the price increase was due to the glove shortage, as governments across the world have started procuring gloves directly from manufacturers.
“We believe that there is more upside for margin improvement, as we expect raw material prices to fall in tandem with the oil price,” it added.
“Initially in the early stage of the virus outbreak, sales orders came mainly from China, Hong Kong, Singapore and South Korea. Top Glove has in recent weeks also received strong orders from Europe, US and other countries.
“With current utilisation levels at more than 90 per cent, the group is able to further ramp up production close to 100 per cent, to meet the surge in demand. It has new capacity coming on-stream with F2B and F5A having commenced operations, which will add 3.2 billion pieces of gloves per annum,” Kenanga Research explained.
Meanwhile, on Top Glove’s second quarter of the financial year 2020 (2QFY20) results, Top Glove said it is confident of achieving higher volume sales in 2HFY20 following the Covid-19 pandemic.
“Management highlighted that requests for huge volumes of gloves to the tune of 400 million to 500 million pieces are coming from countries including Spain, France, Italy, Germany, Saudi Arabia. Correspondingly, management is confident of midteens growth in volume sales since orders have been secured up till August 2020,” Kenanga Research said.