Top Glove narrows loss amid production optimisation programme

Shah Alam, Malaysia – Top Glove Corp. Bhd has narrowed loss in the third quarter of fiscal 2023, due mainly to improved average selling prices (ASPs) as well as its ongoing quality and optimisation plans.

For the quarter ended 31 May, the group registered revenue of RM531 million (€105 million) , down 64% compared to the year before, said Top Glove 16 June.

Loss after tax came in at RM120 million, an improvement of 23% compared to a RM155 million loss reported in the previous quarter.

The figure, however, was substantially lower than a profit of RM29 million reported in the third quarter of 2022.

The group said it improved its ‘overall operating performance’ amidst a challenging business landscape, due in part to a 6% increase in ASPs.

Furthermore, it linked the improvement to “quality and cost optimisation initiatives to streamline operations.”

The measures employed included “decommissioning obsolete production lines and temporarily stopping production at 17 out of its 49 factories", said Top Glove.

According to the glove maker, the decommissioning reduced the group’s production capacity by 5 billion pieces, bringing its total production capacity to 95 billion pieces of gloves per year.

In addition, the group said it implemented a “manpower restructuring exercise”, but did not elaborate further.

The measures fall within Top Glove’s six-point “comeback strategy” which involves boosting volumes, enhancing quality, consolidating facilities, enhancing “people productivity”, strengthening cash flow and optimising supply chain.

The optimisation of supply chain, Top Glove stressed, will have “a pivotal role” in revitalising the group.

“While we may be in a loss position, it is encouraging that the quantum of operational losses has reduced from the previous quarter,” said Lim Cheong Guan, managing director.

Top Glove, Lim went on to say, will “navigate the challenging business environment” through a series of measures aimed at improving sales, eliminating waste, trimming expenditures and streamlining processes.

The group’s “rationalisation exercise” and the temporary production halts were aimed at addressing the oversupply situation, explained the Top Glove boss.

“[It] was an important step towards the group’s continual endurance and competitiveness in the long term,” he added.

Meanwhile, Top Glove has been at the forefront of a campaign to increase the sales prices for rubber gloves, despite its impact on volumes.

“As glove manufacturers are unable to fully absorb rising costs indefinitely, this [raising prices] is a necessary step for the long term sustainability of the glove industry,” it added.

For the short-term outlook, Top Glove said the business environment is expected to remain "challenging and competitive" throughout the second half of 2023.

However, the group is optimistic on long term prospects as gloves continue to be "an essential item" for single usage in the healthcare and food industries.

“While there has been oversupply and customer stockpiling over the past two years, it is important to note that glove consumption itself has not decreased,” said Lim.

On the contrary, Lim said, glove consumption has gone up post-pandemic, on the back of elevated hygiene and health awareness.

“As customers’ and manufacturers’ glove inventory is close to depletion, replenishment activity is expected to commence in the second half of calendar year 2023, spurring an uptick in glove demand,” the Top Glove boss concluded.