KUALA LUMPUR (March 16): Top Glove Corp Bhd reported a third loss-making quarter in the second quarter ended Feb 28, 2023 (2QFY2023), as the existing glut in stocks and ongoing moderation of average selling prices (ASPs), compounded by rising production costs, weighed on its performance.
The group’s net loss stood at RM164.67 million or 2.06 sen per share for 2QFY2023, compared to a net profit of RM87.55 million or 1.09 sen a year earlier.
Revenue more than halved to RM618 million from RM1.48 billion, the world's largest glove maker showed in a bourse filing with Bursa Malaysia.
Quarter-on-quarter, losses narrowed slightly for the quarter under review versus RM168.24 million for 1QFY2023.
The dismal quarterly results dragged the group’s performance for the first six months of FY2023 to a net loss of RM332.90 million, against a net profit of RM273.27 million a year earlier. Half-year revenue declined 58.2% to RM1.25 billion, from RM3.09 billion previously.
In a separate statement, Top Glove said the group’s financial performance continued to be impacted by headwinds that had weighed heavily on the glove industry.
“Destocking activity persisted, driven by excess customer inventories, resulting in a softer order book. Aggravating the situation was the ongoing glove oversupply situation, combined with a lack of customer urgency to place orders in light of shorter delivery times from lower manufacturer utilisation," it noted.
Rising production costs also weighed on Top Glove’s earnings, as the group was unable to pass it on to customers owing to moderating ASPs.
Nonetheless, the group noted that customers’ glove inventory levels were moving closer to normality.
“However, while sales have started to pick up, not all orders received will prove feasible, due to lower price points. As the glove industry faces losses, coupled with escalating costs, the industry has started to revise selling prices upward from February 2023, which is a necessary step towards the industry’s eventual recovery and sustainability,” it added.
Still, he expects the challenging and competitive business landscape to endure through 2023.
However, the group takes a long-term view of industry prospects, which are still promising.
Top Glove managing director Lim Cheong Guan observed that the glove industry had been experiencing an extremely challenging past one year, owing to the perfect storm of rebalancing demand and supply, coupled with softer ASPs and cost increases.
“The financial results delivered are not representative of actual potential of the company or the industry. This is a temporary phase we will have to weather, after two years of elevated pandemic-driven glove demand,” he said.
To mitigate effects of the headwinds encountered, Lim said the group continued to implement efficiency enhancement and cash conservation initiatives aimed at driving recovery and improving its bottom line, while increasing ASPs to offset rising costs.
“We are under no illusion, and remain mindful that the market will continue to equilibrate in the near term. Nonetheless, we believe that the glove industry will recover in due course, as its fundamentals remain robust and unchanged. We believe that it will be a matter of time, before our results are more reflective of the glove industry’s potential,” he concluded.
At the midday break on Thursday (March 16), Top Glove's share price had risen two sen or 2.86% to 72 sen, giving the group a market capitalisation of RM5.91 billion. Year to date, the stock has depreciated 21% from 87 sen on Jan 3 this year.