Top Glove, the world’s largest manufacturer of gloves, was able to break records in more ways than one this past year despite markets and economies being disrupted by the Covid-19 pandemic. That is because heightened health and public safety have led to a spike in demand for medical products, especially personal protection equipment, ranging from masks and gowns to natural rubber, nitrile and surgical gloves produced by the company.
But even after a supercharged year where volume, selling prices, earnings and, consequently, its share price all surged, the company still sees room for further growth ahead. “There is a lot of potential for growth as gloves are widely used in developed countries, but still underused in emerging countries. As an illustration, just 20% of the world’s population (in the US, Europe and Japan) account for 70% of glove usage,” says executive chairman Dr Lim Wee Chai in an email interview with The Edge Singapore.
“Eighty per cent of the world population is only using 30% of the gloves produced globally, which means there is still a lot of opportunity for growth,” he adds.
SEE: Glove makers Riverstone and Top Glove in the lead; storied brand Haw Par wins for earnings growth
Presently, Top Glove exports to 195 countries worldwide, in all continents except Antarctica. In what was its best-ever financial year performance, Top Glove’s profit after tax in FY2020 ended Aug 31 surged to RM1.8 billion ($440 million), almost a fivefold increase compared with RM368 million in FY2019. Revenue in FY2020 rose 51% to RM7.2 billion from a year ago and growth in demand in 4QFY2020 compared to 4QFY2019 was highest in Asia (+110%), Western Europe (+73%) and Eastern Europe (+64%).
Dividends have also risen accordingly. Top Glove declared a dividend of 8.5 sen per share in 4QFY2020, bringing the total dividend payout for FY2020 to 11.8 sen per share, almost five times the 2.5 sen dividend announced in FY2019.
For this year’s Billion Dollar Club, Top Glove has been named the company that offers the most returns to shareholders. It managed this feat not just within the Healthcare Services & Pharmaceuticals sector, it is also the leader among all 82 companies qualified for consideration for this year’s Billion Dollar Club. The company’s share price was $5.27 as at Jun 30, 2019, the cut-off date used to calculate this year’s Billion Dollar Club winners.
This compared to 86 cents back on June 30, 2017, and translated into a CAGR of 83%. Top Glove’s returns to shareholders over this period beat two fellow glove makers Riverstone Holdings at 37.5% and Sri Trang Agro-Industry at 30.2%. The company ranked fourth in this metric was Keppel DC REIT, which is enjoying a surge because of growing demand for data centre assets.
From local to global
Lim founded the Top Glove Malaysia back in 1991. To make rubber gloves in the resource-rich country makes perfect sense, given the country is one of the world’s leading producers of natural rubber.
Via organic growth and acquisitions, Top Glove has grown to become the world’s largest manufacturer of gloves, with a market share of 26%. Besides exporting to the rest of the world, Top Glove is an MNC in more ways than one.
It has set up manufacturing facilities in other locations such as Thailand, China and Vietnam. In addition to gloves, the company produces other products such as condoms, face masks, dental dams, exercise bands and a range of home and personal care products.
First listed on Bursa Malaysia back in 2001, Top Glove went on to get a secondary listing on the Singapore Exchange in 2016. With the surge in investors’ interest beyond Southeast Asia, Top Glove has plans to list in Hong Kong too.
Indeed, shareholders should be delighted with the performance of Top Glove. According to Top Glove’s estimates, investors who bought its Malaysian shares back in 2001 would have seen the value increase by 400 times to date. Those who bought its Singapore shares would have seen the value grow 10 times in the four years since its listing.
The surge in share price, of course, is backed by corresponding growth in its financials. Since its listing in March 2001, Top Glove has seen steady growth, with revenue CAGR at 23.1%. This is more than double the overall industry market growth of 10%. “We are proud to contribute to the nation’s economy through our business, as well as deliver sustainable value to our shareholders,” says Lim.
As at Aug 31, Top Glove has 60,104 shareholders, more than double the 28,523 it reported in 2019. In terms of market capitalisation, Top Glove is now the fifth largest company on Bursa Malaysia and the ninth largest company on SGX, with market capitalisation of RM54.7 billion and $18.1 billion respectively as at Dec 2.
SEE: Top Glove posts 1Q earnings of RM2.38 bil following record quarterly revenue of RM4.76 bil
Ramping up capacity
At present, the surge in demand for its products following the outbreak of the pandemic has pushed Top Glove’s production lines to its capacity. Prior to Covid-19, the company had a lead time of between 30 to 40 days.
With the demand surge, Top Glove’s lead time in August extended to 630 days for nitrile gloves, 360 days for natural rubber gloves, 200 days for vinyl gloves and 170 days for surgical gloves. To meet the demand while prioritising public health and safety, the company has earmarked RM10 billion for capital expenditures over the next five years from FY2021 to FY2025 to provide additional production capacity for 100 billion pieces of gloves.
Further upstream, Top Glove has also established two latex concentrate plants, three chemical factories, one glove former factory and two packaging material factories. Factory F41, the company’s first factory in Vietnam, began operations in October with an initial production capacity of approximately 2.4 billion pieces of gloves from its 10 post-production lines.
Top Glove foresees post-Covid-19 glove demand to grow to 15% per annum for 2022 and 2023, on the back of increased usage in both the medical and non-medical sectors, as well as heightened hygiene awareness arising from the pandemic.
To improve productivity, the company is turning to automation and digitalisation. Top Glove has reduced the workers per million gloves (WPM) from 8.4 in 2001 to 1.9 in 2020. The company currently has 21,000 employees and aims to eventually reduce its dependency on unskilled workers. As of September, Top Glove employs 752 researchers at its seven R&D centres.
Looking ahead, Top Glove aims to be a Fortune Global 500 Company by 2035. “We will continue to expand our business. With or without the pandemic, it is our strategy to build or acquire more glove factories every one or two years,” says Lim.
Capping off a busy year for his company, Lim takes a moment to look back at his role models and pillars of support. “My father is my role model who taught me to ‘never give up in everything we do, dare to dream and dare to achieve it’. It’s normal to have challenges in life but if we put in 100% of our efforts to solve it, we will get through the difficulties and it will definitely become part of our life experience,” he says.
“Before founding Top Glove, I worked in sales at OYL Industries, a Malaysian air conditioner manufacturer, which was later acquired by Japan’s Daikin. I learnt a lot from my boss, especially how to be disciplined,” adds Lim.
Finally, he is thankful for his family, “especially my wife, whose support and good advice have been key to my success thus far
