Higher revenue for Top Glove in second quarter of financial year 2017

KUCHING: Top Glove Corporation Bhd ( Top Glove) posted improved sales revenue for the second quarter of financial year 2017 ( 2QFY17) ended February 2017 amidst an increasingly challenging business environment.

The world largest glove manufacturer in a filing to Bursa Malaysia yesterday said turnover for the period gained 23 per cent year- on- year ( y- o- y) to RM851.54 million from RM693.86 million in 2QFY16 ended Februrary 2016.

Top Glove’s sales increased by eight per cent as compared to RM785.58 million registered in 1QFY17 ended November 2016.

Similarly, the group’s profit before tax and profit after tax for 2QFY17 were on the rise, coming in at RM102.7 million and RM83.2 million respectively, representing an increase of 14 per cent and 13 per cent.

The firm’s 2QFY17 sales volume increased by nine per cent as compared with 2QFY16 but eased by one per cent quarter- on- quarter ( q- o- q) due to shorter work months during the quarter ended Februrary 2017.

Top Glove noted its strong performance despite the less favourable conditions was attributed to improvements adopted across the manufacturing process, which enabled the group to maintain good quality while managing its costs efficiently.

The implementation of upward price revisions – the effects of which were felt in 2QFY17 – were also instrumental in normalising sales revenue figures as compared with the previous quarter.

However, Top Glove observed that its 2QFY17 profit after tax was softer by 21 per cent versus 2QFY16, on the back of sharp increases in raw material prices.

For the first half of financial year 2017 ( 1HFY17) ended February 2017, Top Glove said it recorded sales revenue of RM1.6 billion demonstrating growth of 10 per cent, while sales volume trended upward by eight per cent as compared with 1HFY16.

Additionally, the glove manufacturer said 1HFY17 profit after tax registered at RM156.8 million, easing by 33 per cent from 1HFY16 due to higher raw material prices in 1HFY17.

Meanwhile, in 2QFY17, Top Glove observed that the average latex price surged to a five- year high, rising by 33 per cent to RM5.95 per kg as compared to 1QFY17 and 72 per cent as compared with 2QFY16.

Besides that, the company noted the average price for nitrile also increased to US$ 1.08 per kg, going up by 10 per cent as compared to 1QFY17 and 12 per cent as compared with 2QFY16.

The sharp rise in raw material prices have steadily driven average selling prices ( ASPs) upwards.

Commenting on the 2QFY17 financial results, Top Glove’s executive chairman Tan Sri Dr Lim Wee Chai said: “We have delivered a healthy set of numbers for our 2QFY17, despite a challenging business environment with sharp increases in manufacturing cost.

“This shows that our approach of focusing on internal factors within our control, such as quality and cost efficiency, and not external factors, is the correct way forward for our business,” he said.

Moreover, Top Glove believed that as an essential item in the medical sector, the global demand for gloves is expected to continue growing by six per cent to eight per cent every year.

To ensure that the company is ready to meet the demand both in developed and emerging markets, Top Glove revealed that it has steadily expanding its operations.

“Construction of a new ( manufacturing) facility, Factory 30 at Klang, Selangor is almost completed and is expected to commence production by May 2017 with a production capacity of 4.4 billion gloves per annum.

“Meanwhile, additional new ( manufacturing) facilities in Klang, Factory 31 and Factory 32 will respectively commence operations by November 2017 and December 2018, with a production capacity of 2.8 billion and 4.8 billion gloves per annum.

“By December 2018, the group is projected to have 632 production lines and a production capacity of 60 billion gloves per annum,” the company disclosed.

Towards improving operational efficiency and increasing automation, Top Glove has also been working with government agencies and domain experts to develop Industry 4.0 applications, which it is in the process of implementing throughout its factories.

As a matter of course, the manufacturer is concurrently exploring mergers and acquisitions and joint ventures with good valuations in similar or related industries.

As at February 28, 2017, Top Glovehas maintained a positive net cash position of RM38.6 million and a healthy balance sheet.