Top Glove missed 1HFY24 results on weak margins
KUCHING: Rubber glove manufacturer Top Glove Corporation Bhd’s (Top Glove) first half of financial year 2024 (1HFY24) results have missed expectations due to lower-thanexpected margins during the period.
In 1HFY24, the group registered a net loss of RM108.9 million which was higher than market consensus full-year net loss estimates of RM69 million.
Its revenue also fell by 16.5 per cent year on year (y-oy) to RM1.04 billion due an 8 per cent lower average selling price (ASP) and a 12 per cent lower sales volume.
However, the group’s net loss narrowed by 67.3 per cent y-o-y from RM332.9 million in 1HFY23 to RM108.9 million.
Looking at the group’s second quarter (2Q) results, its revenue had improved by 11.5 per cent quarter on quarter (y-o-y) to RM550.3 million while its net loss narrowed further from RM57.7 million in the previous quarter to RM51.2 million.
In a results note, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) noted the current weak-than-expected earnings were exacerbated higher input prices from natural latex prices, nitrile butadiene rubber and a depressed utilisation rates that are hovering at around 45 per cent.
They added that Top Glove’s management has reiterated that the current business landscape remains challenging but that it is hopeful that the group will return to profitability in either the further quarter of financial year 2024 (4QFY24) or by early FY5.
“The Group is optimistic that the strong growth momentum will sustain, as customers continue replenishing their depleting glove stockpiles.
“The group continues to see month on month (m-o-m) uptrend in sales volume in March 2024 and expect customers’ replenishment activity to pick up in subsequent quarters, underpinned by inventory rebuilding from distributors, indicating early signs of potential recovery in demand,” said the research arm.
It was also highlighted that Top Glove has observed that sales order rising by 30 to 40 per cent m-o-m.
Despite the optimism for a quick turnaround, Kenanga Research took a more cautious stance and detailed that they are expecting volatile quarterly sales orders in the subsequent quarters as they opine distributors and buyers seeing no urgency to place sizeable orders or hold substantial stocks as supply is current still plentiful and readily available.