Aspion may take four to seven years to achieve RM80mil earnings

SETIA ALAM: The projected net profit of Top Glove Corp Bhd’s wholly-owned subsidiary Aspion Sdn Bhd at RM80mil will take four to seven years to be realised.

This will be aided by technological improvements to Aspion’s operations and Top Glove has since deployed a team of professionals to improve the profitability of Aspion’s three glove factories.

According to Top Glove executive chairman Tan Sri Dr Lim Wee Chai, Aspion’s net profit for the financial year ended August 31, 2018, amounted to an estimated RM20mil to RM30mil.

“Aspion’s profit did not contribute (to the group) as much as we expected due to the manipulated financial statements.

“Although it is expensive to take corrective action and we could have just enjoyed Aspion’s profit guarantee for the next two years, we believe that the value of integrity in the long term is much higher.

“With our track record, capability and experience, we are able to turn around or upgrade a glove factory’s performance, in terms of efficiency and technology – we are very good in (the) glove business,” he said.

He was speaking to reporters at a briefing on Top Glove’s financial year 2018 (FY18) results.

Lim explained that in another subsidiary’s case, Flexitech Sdn Bhd, it took the group five to eight years to attain the expected net profit level.

Top Glove is taking legal action against the vendors of Aspion to claim a sum of no less than RM714.86mil due to overstatement of assets and valuations of the company.

This came after Top Glove completed its acquisition of Aspion for RM1.37bil in April this year.

The initial profit guarantee for Aspion’s financial years ending October 31, 2018 and 2019, was RM81mil and RM108mil, respectively.

Apart from that, Top Glove intends to set up two new research centres next year, which will grow its number of researchers to an estimated 400 to 450.

Currently, the group’s research and development (R&D) investment allocation amounts to 4% of total net profit.

“However, we noticed that it is insufficient and we intend to invest more because we can create greater value through R&D,” said Lim.

On the group’s ongoing expansion of its nitrile glove manufacturing facilities in Malaysia, phases 1 and 2 of F32 is due to be completed early 2019 and end-2019, respectively, while F33 shall be completed in early 2019, and F5A completed by end-2019.

Over in Thailand, plant F8A is set for completion in early 2020 and will have a capacity of 3.2 billion pieces of nitrile and latex gloves.

These expansions will add a total of 98 lines with a production capacity of 9.8 billion pieces of gloves annually, bringing total production lines to 746 and a production capacity of 69.1 billion gloves per annum by 2020.

Top Glove registered record highs in FY18, with its full year revenue at RM4.2bil and net profit at RM437mil.