In what is seen as its best-ever quarterly performance, Top Glove Corp reported earnings of RM1.29 billion ($0.42 billion) in its 4QFY2020 ended August.
This is almost 18 times the RM74.2 million posted in the same period a year ago and follows a surge in global demand for gloves and face masks amid the ongoing coronavirus pandemic.
On a fully diluted basis, this translates to earnings per share of 15.95 sens in 4QFY2020, a significant surge from the 0.97 sens generated in 4QFY2019.
The board has recommended a final dividend of 8.5 sens per share, bringing the total dividend payout for FY2020 to 11.8 sens per share. This is 9.3 sens or almost five times the 2.5 sen dividend paid in FY2019, and represents a net profit payout ratio of 51%.
Revenue for the quarter surged 161.5% to RM3.11 billion in 4QFY2020, thanks to higher demand for gloves in the region.
Specifically, the growth in demand was highest in Asia (+110%), Western Europe (+73%) and Eastern Europe (+64%), compared to 4QFY19.
“Demand was most robust for nitrile gloves which grew by 31% year-on-year, while natural rubber examination gloves also saw growth of 7% versus the corresponding period in FY19,” Top Glove said in its results filing. It added that a corresponding upward adjustment in Average Selling Prices (ASPs) also pushed income levels up.
Additionally, the personal protective gear manufacturer points to productivity enhancements, which have translated to a near 100% utilisation of the company’s production capacity.
This in term helped generate economies of school and lower overheads such as the cost of labour and natural gas.
Meanwhile, the higher earnings came at a cost: higher expenses. Operating expenses for the quarter surged to RM1.5 billion, from RM1.1 billion following higher costs of production.
For instance, raw material prices surged in 4QFY2020, with natural latex concentrate inching up by 3.9% to an average of RM4.56/kg and nitrile latex rising 3.3% to an average of US$0.94/kg ($1.28/kg).
For the full year, Top Glove’s earnings leapt 412% to RM1.87 billion for FY2020 ended August, from RM364.68 million a year ago.
Revenue for the year soared by 50.7% to RM7.24 million, thanks to a stronger order book. This also meant a longer delivery lead time of 400 days in 4QFY2020, compared to the 40-day time frame Top Glove previously adhered to.
Additionally, Top Glove’s subsidiary Aspion also contributed to the record income with earnings amounting to RM139.9 million
Says Top Glove’s executive chairman Lim Wee Chai, “Our unprecedented performance underlines the effectiveness of our ongoing technology-driven improvement initiatives, which focus on quality and cost efficiency, and which have enabled us to meet the increase in glove demand”.
The company has been taking steps to cope with the heightened demand. For instance, it has intensified its hiring efforts and has employed 4,000 local staff in the year.
It will also continue to expand its capacity from about 10% to about 15%, once the pandemic abates. For this, it the company has earmarked RM8 billion, to build 450 new production lines between calendar year 2020 (CY20) and CY2026. These facilities will allow the company to build 100 billion additional pieces of gloves.
The funds will also be invested into a gamma sterilisation plant, a land bank for future expansions, Industrial Revolution (IR) 4.0 digitalisation technology and improvements to its workers’ facilities.
Top Glove is on track to seeing these developments through with Factory F41- its first factory in Vietnam expected to “come onstream” in October. Here, the group will have 10 production lines, allowing it produce some 2.4 billion pieces of gloves.
With cash and cash equivalents of RM1.2 billion at end FY2020, up from RM165.7 million, the company is in good stead to see through these expansions.
Lim is also heartened that Top Glove emerged among the top performers on both Bursa Malaysia (2nd largest company) and Singapore exchange (9th largest company).
“With more upside in glove demand expected, we look forward to fresh highs in FY21” ending in August 20201, the group says.
As at 4.21pm, shares of Top Glove were down 32 cents or 10.7% to $2.68.
