Top Glove expects gradual ASPs decline

The rubber glovemaker saw weaker performance in 3Q21, mainly due to the decline in ASPs by 16%


TOP Glove Corp Bhd expects a gradual decline in the average selling prices (ASPs) of gloves in the coming quarters in line with market pricing trends, although the global glove demand will continue to remain resilient driven by the ongoing Covid-19 pandemic.

Its group ED Lim Cheong Guan said on a quarterly basis, the rubber glovemaker saw weaker performance in the third quarter ended May 31, 2021 (3Q21), mainly due to the decline in ASPs by 16% following price adjustment and lower sales quantity on the back of the temporary halt in shipments to the US in compliance with requirement by the US Customs and Border Protection.

He noted that the ASP of nitrile gloves was down 20% quarter-on-quarter (QoQ), while latex powder free glove ASP was down by 2%.

The ASP of surgical gloves was adjusted down by 12% QoQ in line with market pricing trend, while vinyl gloves’ ASP declined by 20% in 3Q21.

“We do expect lower nitrile latex prices in the coming months as butadiene and acrylonitrile, which are the raw materials for nitrile latex, are forecast to decline by 10% and 6% respectively between May and August 2021.

“Lower natural rubber latex concentrate price is expected in coming months with the wintering season ending in May 2021, and yields are expected to improve,” he said during a virtual media briefing on the group’s latest quarterly result.

The glovemaker’s net profit rose 485.3% year-on-year (YoY) to RM2.04 billion in 3Q21 on the back of higher sales output coupled with higher ASPs which peaked in February.

Revenue for the quarter rose 146.6% YoY to RM4.16 billion on sustained demand for gloves globally due to the pandemic.

In a bourse filing yesterday, the largest rubber glovemaker in the world noted that its healthy profit was supported by ongoing enhancements across its operations, through digital transformation, continuous research and development and innovation, quality and productivity initiatives.

On a nine-month basis, Top Glove’s earnings surged 1,163% YoY to RM7.26 billion as revenue grew by 246.2% YoY to RM14.29 billion.

On a quarterly basis, its net profit fell 29.03% to RM2.03 billion from RM2.87 billion for 2Q21, while revenue dipped 22.42% to RM4.16 billion from RM5.37 billion due to the export ban to the US.

Top Glove declared a third interim dividend of 18 sen per share to be paid on July 7, 2021.

Sales volume eased 4% QoQ mainly due to reduction in sales to the US. Lim said the group expects volume to increase between 10% and 20% in 4Q21 and further improvement in volume can be expected if the US’ import ban is lifted earlier.

Top Glove MD Datuk Lee Kim Meow said the group has not been updated on the possible timeline for the ban to be lifted, but the group’s remediation efforts for its workers are being verified.

In April, Top Glove stated it was cleared of all 11 International Labour Organisation’s indicators of forced labour which include abuse of vulnerability, retention of identity documents and restriction of movement, among others.

Top Glove executive chairman Tan Sri Dr Lim Wee Chai said although the action taken by the US had delayed the group’s listing in Hong Kong, the delay would be temporary and the listing would improve the group’s standing in the long run.