KUALA LUMPUR (March 9): Top Glove Corp Bhd’s net profit for the second quarter ended Feb 28, 2022 (2QFY22) dropped by 52.86% to RM87.55 million from RM185.72 million in the preceding quarter, while its revenue decreased by 8.51% to RM1.45 billion from RM1.58 billion as average selling prices (ASPs) normalised closer to pre-pandemic levels, which offset an uptick in sales volume.

On a yearly basis, the glove maker's net profit slumped 96.95% from RM2.87 billion a year prior. Its revenue also tumbled 72.99% from RM5.37 billion in 2QFY21, the group's filing with Bursa Malaysia showed.

Its earnings per share for 2QFY22 slipped to 1.09 sen from 35.77 sen a year prior.

The group did not declare any dividend for the latest quarter.

As for the first half ended Feb 28, 2022, the group’s net profit plunged 94.77% to RM273.27 million from RM5.23 billion in the year-ago period, while its revenue slumped 70.04% to RM3.03 billion from RM10.12 billion.

Top Glove noted that besides normalising ASPs, raw material prices were also generally on a downward trend, albeit at a slower pace than ASPs, which resulted in margin compression.

It said the group also had to contend with increases in other operating costs including utilities, manpower and chemical costs, as well as intensifying competition, with the new glove supply causing pricing pressure in light of the successful Covid-19 vaccine rollout globally.

However, it said the group has anticipated this adjustment and is well prepared for a more challenging period ahead as it transitions towards a pre-pandemic scenario.

Despite challenges encountered in 2QFY22, it said the group’s sales volume has shown a marked improvement in comparison with 1QFY22, following the resumption of regular glove restocking activity by customers, and as ASPs approach pre-pandemic levels.

Moreover, it said the group’s sales to the United States (US) are well on its path to recovery since September 2021, with sales volume to the US market growing sharply by 220% to date.

In September 2021, its sales to the US comprised 4% of total group global sales and by February 2022, sales to the US had grown to contribute 13% towards total group global sales.

In tandem, the group’s production utilisation increased from 60% in September 2021 to 73% in February 2022.

According to Top Glove, raw material prices have decreased compared to 2QFY21, with average natural latex concentrate prices dropping by 6% to RM5.57 per kg, whilst nitrile latex prices declined by 50% to US$1.15 (RM4.81) per kg.

It also noted that as at Feb 28, 2022, the group maintained a net cash position of RM656 million and net assets of RM6.95 billion.

“For the past two years, we have been accustomed to delivering exceptional results. While our 2QFY22 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,” its managing director Datuk Lee Kim Meow said in a separate statement.

“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 added.

In light of the current supply situation, Top Glove said it will remain cautious and scale back on its expansion plans for the interim.

The group will, however, continue to monitor the situation closely and stands ready to reinstate expansion plans as required when demand eventually picks up.

It also said the business environment is anticipated to be challenging and competitive in the immediate term, as the pandemic gradually comes under control.

The additional glove supply and ensuing pricing/margin pressure may in turn result in industry consolidation, as part of the business cycle, it added.

Nonetheless, taking a positive view of the situation, Top Glove 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,” said Lee.

At noon break, Top Glove declined by seven sen or 3.74% to RM1.80, valuing the group at RM15.59 billion.

Over the past one year, the counter has fallen 65.32%.

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