KUALA LUMPUR (March 20): Top Glove Corp Bhd believes that the Red Sea crisis and an investigation into anti-dumping duties by the Brazilian government will have minimal impact on its financial performance.
According to the group’s managing director Lim Cheong Guan, shipping rates have increased by two to three times due to the Red Sea crisis, but Top Glove's sales are mainly free on board, which means a buyer assumes ownership and liability for goods being transported.
“Some of our customers do have some sort of delays in the shipment mainly because of the high shipping fees, but eventually it will be shipped out because they still have to buy gloves as well,” he said after the results briefing for the second quarter ended Feb 29, 2024 (2QFY2024).
Top Glove's sales volume surged by 18% quarter-on-quarter in 2QFY2024, on the back of a recovery in glove demand, as customers replenished their depleting glove stockpiles.
Lim was asked to comment on the impact of the Red Sea crisis on the company.
Last month, its peer Hartalega Holdings Bhd said sales dipped on logistical challenges from the Red Sea crisis when it announced its financial results for the third quarter ended Dec 31, 2023 (3QFY2024).
Meanwhile, the anti-dumping duties imposed on Top Glove by the Brazilian government is seen as having a limited impact on the company’s financial performance in the near term, said Lim.
Brazil accounts for only 3-5% of the group’s total sales, of which 70% are medical examination gloves which are affected by the provision.
“We cannot export to Brazil but we have a distribution centre in Brazil where it has [glove] stocks for a few months. In fact, the selling price has gone up by 50% to 80% in the local market. Our distribution centre should make better profit and compensate for the loss in profit from the exports from Malaysia,” he said.
He added that the company, along with its peers, had submitted an appeal to the Brazilian government to revise the provisional duties.
In July 2023, Brazil initiated an anti-dumping probe against imports of gloves used for non-surgical procedures from Malaysia, Thailand and China.
Top Glove sees room for sales growth in North America
Top Glove sees room to grow in the North American market, as more Chinese glove manufacturers are being added to the US Food and Drug Administration (FDA) import alert.
The smaller pricing gap between Malaysian and Chinese glove makers allows customers a better choice of outsourcing orders to Malaysian glove manufacturers, Lim added.
The North American market is a major export market for Top Glove, accounting for 17% of its sales volume in 2QFY2024.