Taxing business climate hits Top Glove Q4 results
> Tailwinds in first half turn into headwinds in last six months of financial year
SHAH ALAM: Top Glove Corp Bhd’s net profit for the fourth quarter ended Aug 31, 2016 fell 36% to RM65.64 million from RM102.76 million a year ago on the back of a challenging environment in the second half of the financial year (2H16), as tailwinds in 1H16 gradually turned to headwinds.
It said increased competition in the second half of the financial year led to a downward revision of the average selling price, while volatility in raw material prices and forex created a mismatch in the cost pass-through system.
Revenue for quarter grew marginally by 1.8% to RM722.11 million compared with RM709.44 million in the previous year’s corresponding period.
For the full year, its net profit rose 29% to RM361.05 million from RM279.78 million a year ago, while revenue at RM2.89 billion was an increase of 15.1% over RM2.51 billion in FY15.
The group said FY16 was another record year, with historical highs in both revenue and profit. The robust set of numbers was attributed to several improvement initiatives, which have enhanced quality and cost efficiency. A stronger US dollar, as well as lower raw material prices earlier in the financial year, boosted the group’s performance.
Top Glove executive chairman Tan Sri Lim Wee Chai said amid a challenging business environment with substantial cost increases and intense competition, it has achieved another record performance. “This is a credit to the internal quality and efficiency enhancements we have been implementing continually, as well as our management team and staff, who have worked hard.”
Top Glove, which celebrates its 25th anniversary this year, remains in expansion mode. Top Glove will continue to pursue merger and acquisition opportunities that synergise with its current business, both in similar or related industries.
It has proposed a final dividend of 8.5 sen, bringing the total FY16 dividend payout to 14.5 sen, subject to shareholders’ approval at the upcoming AGM in January 2017. This represents a 26% increase in dividend per share compared with the previous financial year and a dividend payout ratio of 50.3%.
Top Glove foresees a competitive business landscape ahead, with the likelihood of oversupply and, eventually, industry consolidation. However, the group is confident of overcoming any challenges by enhancing its cost management and optimising the efficiency of its production lines.