Friday 29 Mar 2024
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KUALA LUMPUR (June 9): Top Glove Corp Bhd saw its net profit for the third quarter ended May 31, 2022 (3QFY22) slump 82.53% quarter-on-quarter (q-o-q) to RM15.29 million, from RM87.55 million in the preceding quarter as the group continued to be battered by the effect of the normalisation in terms of demand and average selling prices (ASPs) for gloves following the transition into endemic from pandemic.

Revenue for the quarter, however, was flat at RM1.46 billion from RM1.45 billion in 2QFY22.

On a year-on-year (y-o-y) basis, the world's largest glove manufacturer's net profit was slashed by 99.25% from RM2.04 billion in 3QFY21, while revenue shrank by 64.52% from RM4.16 billion.

As a result, its earnings per share were dragged to 0.19 sen, significantly lower than the 25.44 sen posted for 2QFY21 and the 1.09 sen for 2QFY22.

No dividend was declared during the quarter under review.

In a statement, Top Glove said the resulting softer performance occurred amidst a convergence of headwinds, with production costs moving upwards due to global inflation and as the Russia-Ukraine conflict drove up crude oil prices.

"Additionally, the group contended with increases in natural gas and electricity tariffs, as well as minimum wage implementation which came into effect on May 1, 2022. The escalating costs resulted in margin compression, as the group was unable to fully pass cost through amidst the ongoing oversupply situation," it added.

Nonetheless, it said ASPs are declining at a far slower pace which will help cushion the cost impact going forward.

The dismal quarterly earnings performance dragged its cumulative net profit for the nine months ended May 31, 2022 (9MFY22) to just RM288.56 million, which was a 96.03% drop from RM7.26 billion a year ago.

Cumulative 9MFY22 revenue also fell 68.52% y-o-y to RM4.5 billion from RM14.29 billion.

Commenting on the group's results, Top Glove managing director Datuk Lee Kim Meow said this is an extremely challenging time for the glove industry and the quarterly results are not reflective of the company's usual business performance, owing to the ongoing normalisation trend coupled with demand-supply imbalance.

"However, we will press on and continue focusing on the fundamentals: delivering quality products at an efficient cost, a direction which remains our priority both in good and lean times," he said.

Going forward, in consideration of the moderating demand, the group has deferred and reduced its major capex for the immediate term, as it continues to align its expansion plans with market conditions.

Top Glove expects the challenging business environment to persist in the near term, but emphasises the situation is a temporary setback.

Expressing optimism in prospects both for the group and the sector, Lee remarked that in its business, the company always takes a long-term view.

"Top Glove believes that the outlook for the glove industry is still promising as gloves remain an essential item in the healthcare sector.

"We are very confident that demand will keep growing with increased usage from emerging markets where the glove consumption base is relatively low, coupled with higher levels of hygiene and health consciousness in a post pandemic era," he said.

The group also recognised that challenges are part of doing business and has successfully weathered several such cycles since commencing operations 31 years ago.

"As external factors are beyond our control, we continue to focus on internal factors, the most fundamental of which is staying fit and healthy, so that we remain sustainable through the toughest of times. This will enable us to prepare for better times ahead," Lee concluded.

At noon break, Top Glove shares traded four sen or 3.39% higher at RM1.22, valuing the group at RM10.01 billion. The company saw some 26.49 million shares exchange hands, making it among the top 10 actively traded counters on Bursa Malaysia so far on Thursday (June 9).

Edited BySurin Murugiah
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