By NG MIN SHEN & MARK RAO / Pic By MUHD AMIN NAHARUL
Top Glove Corp Bhd is eyeing a revenue growth of up to 10% for the financial year ending Aug 31, 2019 (FY19), while profit margin is expected to remain at around 9.5% despite a potential oversupply of gloves.
Its MD Datuk Lee Kim Meow said the company expects revenue expansion from existing and new businesses including the group’s printing business and chemical operations.
“We’re expecting about 8% to 10% revenue growth this year. Some will be from existing businesses and some from new businesses, including our newly acquired Aspion Sdn Bhd factories as we want to
see more growth from there once we’ve stabilised the operations,” he said at Invest Malaysia 2019 in Kuala Lumpur yesterday.
The world’s largest rubber glove producer is also likely to maintain an average profit margin of around 9.5% this year, as the industry fears oversupply and rising raw material costs.
“If it’s a good year, we may see a profit margin of around 11% to 12%. If it’s a not-so-good year, maybe 8% to 9%. Over the past 18 years, our profit margin has averaged at 9.5%,” executive chairman Tan Sri Dr Lim Wee Chai said.
Lee added that the group’s focus is to enhance its deployed technologies, improve efficiency, increase productivity and step up automation processes.
“In years where there are more tailwinds than headwinds, you have better profit margins. Generally, our industry is stable. You will not see surprises like margins suddenly dropping to 5%,” he said.
Analysts have cautioned over a looming oversupply in the glove sector as glove makers’ production rose with higher than expected demand, which subsequently weighed on average selling prices and margins.
However, Lim said the group is unfazed by the situation.
“The oversupply will affect (us) a little bit, but it’s not critical because the market is strong and big enough to absorb it,” Lim said, adding that the group does not plan to halt its capacity expansion plans as it intends to remain as the world’s largest glove manufacturer.
Top Glove’s revenue stood at RM1.26 billion in the first quarter ended Nov 30, 2018 (1QFY19), while revenue for FY18 was at RM4.21 billion, up 23.5% from RM3.41 billion the year before.
Profit after tax came in at RM111.7 million for 1QFY19, with a profit margin of 8.9%. Profit after tax for FY18 stood at RM437.9 million versus RM330.5 million a year ago, while FY18 profit margin was at 10.4% against 9.7% in FY17.
The group has allocated about RM400 million for capital expenditure for the year. The capital would also be used for land acquisition for its factories and other expansion plans.
“Nowadays, we are acquiring bigger pieces. The land will be in Malaysia, (but) we have not identified the land yet. I think an allocation of less than RM100 million will do (for the landbank acquisition),” Lee said.
Shares of Top Glove were two sen or 0.44% higher at RM4.52 at the midday break yesterday, valuing the company at RM11.53 billion.