KUALA LUMPUR: Top Glove Corp Bhd, the world’s largest rubber glove manufacturer, reported a 3% drop in first-quarter net profit from a year earlier as cheaper raw materials led to lower average selling prices (ASP) for its products.

Higher finance cost and associated losses also curbed profit growth, Top Glove told Bursa Malaysia yesterday. It said net profit fell to RM48.68 million in the first financial quarter ended Nov 30, 2014 (1QFY15) from RM50.28 million a year ago.

Revenue was lower at RM567.63 million compared with RM573.99 million in 1QFY14, “largely owing to lower ASP from decreasing raw material prices”, Top Glove said.

“Intense competition in the nitrile glove segment also hampered cost pass-through and resulted in weaker margins,” Top Glove said.

Natural rubber and synthetic rubber, or nitrile, are crucial raw materials for rubber glove production. Nitrile is derived from crude oil, prices of which have fallen substantially.

Meanwhile, Top Glove is expanding its nitrile glove production.

The firm said the expansion included higher capacity at its factory in Lukut, Negri Sembilan and another in Klang, Selangor.

According to Top Glove, the expansion will grow its total annual capacity to 44.6 billion pieces of gloves a year from 42.6 billion.

“The group expects the glove business environment to remain competitive and challenging.

“However, with better cost-discipline and cost-optimisation practices via continuous automation in place, coupled with an unwavering focus on quality across all aspects of its operations, the group is confident of navigating its way through these challenging times to deliver an improved performance in the quarters ahead,” Top Glove said.

Top Glove shares closed down 3.15% to RM4.30 yesterday, bringing a market capitalisation of RM2.68 billion with a valuation score of 1.20, according to theedgemarkets.com. Valuation score is measured on a scale of 0-3, with 3 suggesting a company gives higher than market average returns and is trading at a lower-than-average valuation.

This article first appeared in The Edge Financial Daily, on December 17, 2014.