KUALA LUMPUR (Oct 6): Top Glove, which posted its first-ever annual loss of RM926.64 million in the financial year ended Aug 31, 2023 (FY2023), is expecting to turn around its business in the next six to 12 months.
Its executive chairman Tan Sri Lim Wee Chai is optimistic that Top Glove’s fortunes will change on the back of glove demand gradually picking up and the expectation of glove average selling price bottoming out.
“The glove market is improving, even now we are in 30% [utilisation rate], and we are positive EBITDA (earnings before interest, tax, depreciation and amortisation). Give us another 10% and 20% [increase in utilisation rate] then we will be profitable. We need six to 12 months to become positive [for bottom line], so by the financial year 2025 [we] could be [making] good profit,” Lim said after a virtual media and analysts’ briefing on Top Glove’s results for the fourth quarter ended Aug 31, 2023 (4QFY2023).
"Now we can see the light at the end of the tunnel because the glove selling price is already at an all-time low, especially for nitrile glove...we have never seen nitrile glove at this low [selling price] for the past 30 years. As an investor or businessman, when the price is at an all-time low, the only direction next is for it to go up. This is the business cycle," Lim added.
The group recorded a positive EBITDA of RM5 million in 4QFY2023, reversing from a negative EBITDA of RM50 million in 3QFY2023. Loss from operation also narrowed to RM97 million, from RM121 million during the same period.
Nonetheless, it recorded a negative EBITDA of RM170 million and a loss from operation for the full year of FY2023.
In FY2022, it posted a positive EBITDA of RM687 million and a profit from operations amounting to RM342 million.
Meanwhile, its net cash position stood at RM390 million in 4QFY2023, improving from RM272 million in 2QFY2023 and RM350 million in 3QFY2023 respectively, due mainly to improving business conditions.
Lim also said the group would sell land and warehouses that are not being utilised to ensure the group is positive for both EBITDA and cash flow positions.
At a current 30% utilisation rate, the world’s largest glove manufacturer produces about 28.5 billion pieces of gloves annually, based on its annual production capacity of 95 billion pieces of gloves in 2023.
The group has been in the red for five straight quarters now, following its latest 4QFY2023's net loss of RM463.15 million. A year ago, net loss amounted to RM62.99 million.
Without the impairment and write off of assets of RM389 million, the group's net loss for 4QFY2023 would have come to RM65 million, half the RM130.59 million net loss it recorded in 3QFY2023.
Revenue for 4QFY2023 dropped 51.93% to RM475.87 million from RM989.94 million in the previous year’s corresponding quarter.
As a result of the higher quarterly loss in 4QFY2023, the group recorded a net loss of RM926.64 million for FY2023, marking the glove maker's first annual loss, on an annual revenue of RM2.26 billion.
In FY2022, the group made an annual net profit of RM225.56 million, on the back of a revenue of RM5.57 billion.
The market consensus forecasts Top Glove to post an annual net profit of RM65.42 million for FY2024 and further grow to RM264.55 million for FY2025.
According to Bloomberg, there are 12 'sell' calls for Top Glove and seven 'hold' calls, while only one gave a 'buy' call on the counter. The average 12-month target price is 70 sen, implying a 7% downside from its closing price of 75.5 sen on Oct 6 (Friday).
Read Also: