Top Glove on recovery track with pick-up in volumes, earnings

Shah Alam, Malaysia – Top Glove Corp. has reported a second quarter of growth in sales volumes, and earnings strengthening over the previous quarter and year.

For the three months ended 29 Feb, the group posted sales of RM550 million (€107 million), an increase of 12% from RM493 million in the preceding quarter.

Second quarter sales, however, remained 11% down compared to the same period last year, Top Glove reported 20 March.

Earnings (EBITDA) strengthened to RM29 million, a 38% improvement against the first quarter of the year, and up from a loss of RM59 million reported last year.

Sales volumes strengthened by 18% sequentially, providing “a good indication that glove demand is picking up strongly on the back of excess inventory depletion.”

During the quarter, Top Glove said natural rubber latex concentrate prices rose at a much faster rate: from an average of RM4.91/kg at end November 2023 to RM5.66/kg at end February 2024.

The spike of 15% in prices, according to the company, led to a “mismatch” with average selling prices (ASPs), thereby affecting margins.

However, the growth in volumes helped increase utilisation rates, thereby improving production and cost efficiency, which Top Glove said mitigated the higher costs.

On a half yearly basis, the group registered a revenue of RM1.04 billion, down 17% from RM1.25 billion reported last year.

The group also narrowed loss after tax to RM87 million, contracting by 72% year on year.

First half earnings also stayed positive, improving 140% to RM50 million year on year.

The group linked its “steady recovery” to stronger sales volumes, as customers placed new orders following the depletion of excess inventory.

The uptrend in sales orders was further spurred by the progressively narrowing price gap which has seen Top Glove achieve parity in ASPs with its overseas peers.

The uptick in orders which boosted production utilisation, resulted in enhanced production and cost efficiency, impacting the bottom line positively.

The group expects to achieve improved results as it continues its ongoing quality and cost optimisation initiatives.

With fundamentals remaining robust, the group continues to see signs of the market rebounding and the business will normalise in due course, said managing director Lim Cheong Guan.

Having gained momentum over the last few quarters, he added, the group expects to "sustain the positive trajectory and return to profitability within the second half of the year."

Top Glove, according to Lim, views the 18% quarter-on-quarter growth volume as “an encouraging sign” towards recovery.

In addition to the depleting glove stockpiles, the manufacturer expects the global glove demand growth of 8% per annum is set to resume in the near future.

These trends, Top Glove added, will absorb excess capacity within the industry, while manufacturers continue to halt expansion towards restoring the demand supply balance.