Top Glove expects better profit margin in 2H20

By SHAZNI ONG / Pic By MUHD AMIN NAHARUL

TOP Glove Corp Bhd expects 20%- 30% increase in its profit margin in the coming quarters on the back of improved average selling price and production capacity amid the ongoing Covid-19 pandemic.

Top Glove executive chairman Tan Sri Dr Lim Wee Chai (picture) is confident the company can cater to overwhelming demand for medical surgical gloves from countries battling the Covid-19 virus.

“Initially, in early February, it was from China and Hong Kong, and then came to Singapore and South Korea.

“Followed by Spain and Italy, and now Australia, France and the US, as well as Latin America,” he said in a conference call briefing yesterday.

Lim said Top Glove is embarking on capacity expansion plans until 2021, which will boost the group’s total number of production lines by an additional 150 and total production capacity by 17.7 billion gloves per annum.

By December 2021, Top Glove is projected to have a total of 861 production lines and production capacity of 91.1 billion gloves per annum made at 39 factories.

Its current production capacity is 73.4 billion pieces per annum made at 711 production lines in 34 factories.

Top Glove MD Datuk Lee Kim Meow said the group will continue to expand in line with the growing glove demand to ensure Top Glove is well-positioned to meet requirements.

“The group envisions an exceptionally strong second half (2H20), during which the full impact of sales orders arising from the Covid-19 pandemic will be reflected,” he said.

Last week, Top Glove announced that its net profit rose 9.3% to RM115.68 million for the second quarter ended Feb 29, 2020 (2Q20), compared to RM105.79 million in the corresponding quarter of the previous year.

Revenue for the quarter was up 6.02% year-on-year to RM1.23 billion due to steady growth in sales volume, with particularly strong growth in the nitrile glove segment which saw a 14% increase in sales volume compared to 2Q19.

The world’s largest glove manufacturer attributed the stronger performance to the tax incentives the group received from its ongoing expansion, as well as unutilised tax allowances from some of its subsidiaries.

For the six cumulative months, Top Glove’s net profit rose 5.22% YoY to RM227.11 million, while revenue was marginally up to RM2.44 billion from RM2.42 billion. Top Glove’s shares closed unchanged yesterday at RM6.20, valuing the company at RM15.89 billion. Lim said the Movement Control Order (MCO) announced by the government had not affected the company as it could still operate at almost 100% capacity.

The company did face some difficulties in the previous week that disrupted the supply chain.

“Through our discussion with the Ministry of International Trade and Industry, we managed to resume work, however, it is only for the production line which now operates 24 hours with two shifts.

“As for the non-critical departments, only 2%-3% are working in the office and the rest are adhering to the government’s MCO,” he said.