KUALA LUMPUR (Dec 20): Top Glove Corp Bhd is anticipating a return to the black as early as August next year, lifted by stronger demand for rubber gloves and rising prices, following the depletion of excess supplies built up globally since the pandemic.
This is evident in a pick-up in sales orders over recent months, according to Top Glove managing director Lim Cheong Guan. The group has already seen a month-on-month jump in orders of about 30%-40% for the month of December, a period that usually sees slower orders.
“We have brighter days ahead due to the increase in the demand for gloves — the uptrend in glove orders indicates demand is picking up to fill the vacuum from the depleting excess stocks,” Cheong Guan told reporters during the group's briefing on its first quarter results on Wednesday (Dec 20).
“Hopefully in the next few quarters, or by end-FY2024, we can breakeven or be in a profitable position,” he said.
The world’s largest glove maker extended its loss-making streak with its sixth consecutive quarter in the red, as it reported a net loss of RM57.17 million for its first quarter ended Nov 30, 2023. But it's a much smaller loss than the RM168.24 million it reported a year ago, which the group attributed to improved operational, quality and cost optimisation efforts.
Besides depleting supply, Cheong Guan said glove demand has risen due to an overall increase in hygiene and health awareness.
“This surge in demand, I would not link it to the recent Covid situation because the surge has been happening over the past one or two months. Our current orders are already on a rising trend,” he said, adding the group has yet to feel any impact from the current Covid-19 situation.
Glove players' share prices have been climbing amid active trades in recent days as a surge in Covid-19 cases spurred investors’ interest in rubber glove counters. Top Glove's share price jumped over 12% on Monday to touch RM1, from 89 sen last Friday.
On Wednesday, the stock has pared most of the gains it made this week to close at 90.5 sen — valuing the glove maker at RM7.43 billion.
Malaysian players poised to meet any demand surge
According to Top Glove executive chairman Tan Sri Lim Wee Chai, Chinese glove makers, which have been giving glove makers here a run for their money as they sell their products at cheaper prices, are ill-equipped to absorb any surge in demand in the near term, as they are about maxed out, with their factories operating at a 90% utilisation rate.
Hence, Wee Chai does not expect the Chinese competitors to ramp up their production capacity to meet any jump in demand, as they are already running at break-even point or even at a loss just to pull the average selling prices of their gloves down by only about US$2 (RM9.32) per 1,000 pieces.
Malaysian players, on the other hand, can easily raise their utilisation rate, which averages about 50% now. Top Glove, with its massive annual production capacity of 60 billion pieces, is running at 30% utilisation rate. So, Wee Chai expects customers will begin to bring more orders to Malaysia.
“We need sales volume to increase our utilisation, which will also make our production costs more efficient,” Cheong Guan added.
At the same time, Wee Chai noted that global customers, especially those from the US, are seeking to diversify their sourcing of gloves due to the ongoing geopolitical issues between the US and China.
Incidents of Chinese glove shipments failing US authorities’ inspections is another factor as to why customers are expected to return to source their gloves from Malaysia, according to Wee Chai.
So, the stage is set for local players to compete for the expected increase in glove demand, Wee Chai said.
Top Glove, however, expects its domestic counterparts to be more “rational” in pricing, Chong Guan added.
This story has been amended with clarifications from Top Glove Corp Bhd.