Top Glove Corporation has reported earnings of RM87.5 million ($28.5 million) for the 2QFY2022 ended Feb 28, down 96.9% from earnings of RM2.87 billion in the corresponding year before.
Earnings per share (EPS) for the quarter fell 97.0% y-o-y to 1.09 sen.
Revenue for the 2QFY2022 plunged 73.0% y-o-y to RM1.45 billion on the back of average selling prices (ASPs), which are normalising closer to pre-pandemic levels.
That said, the results are still higher than the group’s financial performance compared to before the pandemic, says Top Glove in a statement on March 9.
In the 1HFY2022, revenue amounted to RM3.03 billion, down 70% y-o-y, while earnings plunged 95% y-o-y to RM273 million.
Prices for raw materials were also seeing a downward trend, falling at a slower pace than the ASPs, resulting in margin compression.
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During the 2QFY2022, raw material prices fell compared to the same period in the year before, with average natural latex concentrate prices declining by 6% y-o-y to RM5.57/kg. During the quarter, nitrile latex prices decreased by 50% y-o-y to US$1.15 ($1.57)/kg
In addition, the group recorded increases in other operating costs that included utilities, manpower and chemical costs. Intensifying competition did not help either, with the new glove supply causing pricing pressure in light of the successful Covid 19 vaccine rollout globally.
In its financial report, the group says that it had anticipated the adjustment and that it was “well prepared” for a more challenging period as it moves towards a pre-pandemic scenario.
In spite of that, Top Glove saw 10% q-o-q growth in its sales volume following the resumption of regular glove restocking activity by customers, and as ASPs approach pre pandemic levels. The higher volume was also attributable to higher sales to the US.
To be sure, the group’s sales to the US are “well on its path to recovery” since September 2021, after it had received clearance to resume exporting and selling gloves to the country.
No dividend was declared for the current quarter.
As at end-February, cash and cash equivalents stood at RM559.78 million.
“For the past two years, we have been accustomed to delivering exceptional results. While our 2QFY2022 results are not as robust as we would like them to be, this is to be expected as the pandemic recedes and it is part of the business cycle. Having been in the glove business for 31 years, we have seen many such cycles and our experience has prepared us well to go through this one,” says Dato’ Lee Kim Meow, managing director of Top Glove.
“What is important for us now is to continue to focus on quality and efficiency, improve, innovate, invest in research and development (R&D), leverage advanced technology/digitalisation and recruit more good talents, while deepening our commitment to sustainability. With all these in place and our good balance sheet position, I believe we are well able to navigate this challenging period and emerge stronger,” he adds.
Looking ahead, the group says it will remain cautious and scale back on its expansion plans for the time being. It will look at reinstating its expansion plans when demand eventually picks up.
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Despite the normalising results, Top Glove says it is “confident that even in the hardest of times, opportunity still abounds and maintains that the long term industry outlook is promising”.
“Glove demand will still continue to grow steadily, albeit not at the accelerated but unsustainable pace during the pandemic. This challenging period is temporary and we will continue to focus on maintaining our strong foundation by staying mentally, physically and financially healthy. This will position us to weather the tough times and capitalise on good opportunities which are sure to come again”, says Lee.
Shares in Top Glove closed 4 cents lower or 6.72% down at 55.5 cents on March 9, after the release of its results.
Photo: Bloomberg
