KUALA LUMPUR (Dec 16): Top Glove Corp Bhd 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 associate losses also curbed profit growth, Top Glove told the bourse today.

Top Glove said net profit fell to RM48.68 million in the first quarter ended November 30, 2014 (1QFY15) from RM50.28 million.

Revenue was lower at RM567.63 million compared to RM573.99 million, "largely owing to a lower ASP from decreasing raw material prices," Top Glove said.

"Intense competition in the nitrile glove segment also hampered cost past-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.
 
Top Glove is expanding its nitrile glove production. The firm said the expansion included higher capacity at its factory in Lukut, Negeri 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 this challenging time, to deliver an improved performance in the quarters ahead," Top Glove said.