Top Glove in the mood for M&A, looking to seal a deal within a year

KLANG: Top Glove Corp Bhd, a beneficiary of the falling ringgit, is looking to expand aggressively through mergers and acquisitions and is hoping to conclude a deal within a year.
Speaking to reporters after the launch of the 23-storey Top Glove Tower yesterday, chairman Tan Sri Lim Wee Chai (pix) said the company is talking to three or four rubber glove-related companies in Malaysia and Thailand.
“We have our KPI (key performance indicator) and must acquire one to two companies a year for us to grow,” he explained.
Top Glove, which sits on cash pile of RM200 million, will be able to come up with RM1 billion to RM2 billion more for the acquisition, according to Lim.
The company is due to announce its fourth quarter results ended Aug 31, 2015 on Oct 15.
For the nine months ended May 31, 2015, it reported a 31.92% rise in net profit to RM177.03 million from RM134.20 million.
Lim is optimistic about the company’s business prospects as it has benefited from automation and cost efficiency efforts that were started three years ago.
“The weakening ringgit (is) definitely good for manufacturers like us. Our profit will increase substantially, it will be at an all-time high in terms of sales and profit,” he said, adding that factory 30 is under construction.
However, Lim acknowledged that organic growth has been slowing down due to higher operating cost.
Despite being a net gainer of the fall in the ringgit, he said, it doesn’t fully translate into Top Glove’s earnings as the company has reduced selling prices of its products by 3% to 5%.
“Customers are very smart, they’re asking for price reductions and we pass some ‘savings’ back to them for a win-win relationship,” he added.
On raw materials, Lim said latex prices are reasonable at the range of between RM4 and RM5 a kg.
Asked for his budget wish list, Lim urged the government to reintroduce reinvestment allowance for Malaysian firms to reinvest in automation, thus increasing their competitiveness in the global arena.
“Over the past three years, the government’s move to withdraw reinvestment allowance has been a mistake,” he said.
Top Glove Tower has a gross build-up area of 640,000 square feet, with a land and construction cost of RM150 million.
Lim said he believes the new tower will start contributing to the company’s income stream in the next two years. It is expected to break even with a take-up rate of 60% to 70%.
Top Glove produces 45 billion pieces of glove annually through 484 production lines in 27 factories.