KUALA LUMPUR: Top Glove Corporation Bhd will see a compressed profitability margin for this year due to oversupply and low average selling prices (ASP).
General manager of marketing Lim Jin Feng said the market will continue to experience compression despite some recent improvements, primarily due to the ongoing oversupply situation.
During the Covid-19 pandemic, many players expanded their capacity and the entry of new players added to this with additional capacity. China, in particular, significantly increased its capacity, rapidly building factories and production lines.
“While this oversupply situation persists, we have observed some improvements lately. This is mainly because some players have started to slow down or even close down operations due to sustained losses. As a result, both newer and smaller players, along with some existing ones, are now holding back on their capacity expansion,” he told SunBiz at the 11th International Rubber Glove Conference & Exhibition 2024 today.
He said there was a notable improvement last year showed compared to 2022. “While we have observed a positive trend in terms of quantity, profitability remains constrained. This is primarily attributed to ASP.”
Lim said that while the company strives to optimise processes, there is ample room for improvement, particularly within the factory operations.
“We strive to address the issues within our control, but there are always areas for improvement. Reducing wastage, particularly on the factory side, can help improve our margins.
“Additionally, Malaysia is currently facing a freeze on foreign workers, which is another challenge we need to navigate.
“Further, cost is always the primary thing in our industry. The prices of raw materials, foreign labour and utilities play an important role in our industry,” he added.
Recently, rubber glove stocks, including Top Glove, rose in unison after the World Health Organization declared mpox a public health emergency of international concern.
In a research note, UOB Kay Hian said there might be increased trading sentiment in the local glove sector as demand for medical products may surge if the mpox escalates into a worrying outbreak. It added that glove stocks still have an upside, solely on fundamentals, even without taking mpox into account.
For the third quarter ended May 31, 2024 (Q3’24), Top Glove posted sales revenue of RM637 million, an increase of 16% quarter-on-quarter and 20% year-on-year. Operational loss was reduced to RM34 million in Q3’24 from a loss of RM59 million in Q2’24, representing a 42% improvement, the company said in a Bursa Malaysia filing.
Sales volume continued its upward trend, rising 13% compared to Q2’24, reflecting the group’s steady recovery.
The group achieved a net profit of of RM62 million, up 255% from Q2’24 and 152% higher than in Q2’23. The improved profitability was due to gains from disposal of excess land.
