KUALA LUMPUR (June 16): Top Glove Corp Bhd, the world's largest glove manufacturer, pinned hopes for improvement in its bottom line in the coming quarter ended Aug 31, 2023 (4QFY2023) on the back of further uptrend in the average selling prices (ASPs) and lower raw material costs, after racking up a fourth straight quarterly loss.
Nonetheless, the group expects to remain in the red in 4QFY2023.
Speaking at a virtual press conference on Friday (June 16), its managing director Lim Cheong Guan said the immediate focus for the group is to target positive earnings before interest, taxes, depreciation, and amortisation (Ebitda).
“Ebitda positive meaning utilisation rate can increase to 50% in the second half and hopefully the [ASP] price [can see an upward adjustment of between] 3% to 5% range. We can achieve Ebitda breakeven, then next step we will [be] looking [at] turning into the black,” Lim said.
The group’s current utilisation rates for its production facilities are in the 30% range, while its gloves' ASPs stood at US$22 per 1,000 pieces as at May 31, 2023.
Meanwhile, the group expects to get some cost savings derived from lower natural gas prices as it expects prices to come down by 11% in July 2023 as compared to April 2023, given that global natural gas is on a declining trend after reaching a peak in Oct 2022.
Also helping its bottom line is a softer outlook in raw material prices.
Top Glove said the price of nitrile is expected to decrease by 17% from March this year to an estimated US$0.79 per kg for June 2023, while latex is projected to decrease by 13% from March 2023 to an estimated US1.08 per kg for June 2023, after wintering season ends in May.
Another tailwind, the world's largest glove maker said, is replenishment activity, which is expected to commence as its customers' glove inventory is close to depletion, spurring an uptick in global demand in the second half this year.
Top Glove 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.
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.
Shares in Top Glove closed down 11.5 sen or 10.6% to 97.5 sen, giving the group a market capitalisation of RM8 billion.