KUALA LUMPUR (June 16): Top Glove Corp Bhd, the world's largest glove manufacturer, saw its net loss narrow to RM130.59 million for the third financial quarter ended May 31, 2023 (3QFY2023), from RM164.67 million for 2QFY2023, driven by increased average selling prices (ASPs) and ongoing cost optimisation measures.

This marks its fourth straight quarterly loss.

Revenue for 3QFY2023 dropped 14.1% quarter-on-quarter (q-o-q) to RM530.62 million, from RM618 million previously.  

The group's performance was comparably weaker than the year-ago quarter, when it made a net profit of RM15.29 million for 3QFY2022. Revenue also fell 64.5% from RM1.49 billion for 3QFY2022.

For the cumulative nine-month period (9MFY2023), Top Glove posted a net loss of RM463.49 million, compared to a net profit of RM288.56 million a year earlier. Revenue for 9MFY2023 also shrank 61.1% to RM1.78 billion, from RM4.58 billion for 9MFY2022.

In a statement on Friday (June 16), the group attributed the improved quarterly performance to an increase in glove ASPs of 6%, coupled with cost optimisation initiatives to streamline operations.  

The measures employed include decommissioning obsolete production lines and temporarily stopping production at 17 out of its 49 factories, in light of the softer global glove demand which the glove industry continued to contend with.

“The decommissioning of production lines eased the group’s production capacity by five billion pieces of gloves, bringing its total production capacity to 95 billion pieces of gloves,” it noted.

In addition, Top Glove implemented a manpower restructuring exercise. It did not elaborate on this.  

Meanwhile, the group is mindful that being at the forefront of a glove price increase will have an impact on its sales volume.

However, as glove manufacturers are unable to fully absorb rising costs indefinitely, Top Glove said this is a necessary step for the long-term sustainability of the glove industry, which industry players have followed suit.

Raw material prices were on an uptrend q-o-q in 3QFY2023, with the average natural latex concentrate price up by 2% to RM4.78 per kg, while the average nitrile latex price also increased by 7% to US$0.92 per kg.

Natural gas prices, however, decreased 14% q-o-q from RM67.16 per million British thermal units (mmBtu) to RM57.74 per MMBtu.

Charting its path to recovery, the group has in place a six-point comeback strategy. Dubbed "Top Glove Turnaround Plan" (T6), the plan is expected to have a pivotal role in revitalising the group.

Under the turnaround plan, the group has listed down six goals as follow:

“Guided by our six-point turnaround strategy, we will continue to navigate the challenging business environment by improving our sales revenue, enhancing quality, eliminating wastage, optimising resource allocation, trimming expenditures and streamlining our processes towards greater financial efficiency and sustainability,” said Top Glove managing director Lim Cheong Guan.

While the business environment is expected to remain challenging and competitive throughout the second half of calendar year 2023, the group is optimistic about its long-term prospects, as gloves continue to be an essential item for single usage in the healthcare and food industries.

“While there has been oversupply and customer stockpiling over the past two years, it is important to note that glove consumption itself has not decreased. On the contrary, glove consumption has gone up post pandemic, on the back of elevated hygiene and health awareness,”  Lim observed.

“As customers’ and manufacturers’ glove inventory is close to depletion, replenishment activity is expected to commence in the second half of calendar year 2023, spurring an uptick in glove demand. With this, alongside our T6 turnaround initiatives and measured increases in ASPs, we are hopeful of seeing a steady improvement and better days ahead”, he concluded.

At the noon break on Friday, shares in Top Glove settled up two sen or 1.83% at RM1.11, giving the group a market capitalisation of RM9.11 billion. Year to date, the stock has gained 28% from 87 sen on Jan 3 this year.

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