This article first appeared in The Edge Financial Daily, on October 21, 2015.

KUALA LUMPUR: Top Glove Corp Bhd, which achieved a record high profit for the financial year ended Aug 31, 2015 (FY15), aims to acquire one company a year to stay ahead of its rivals. 

Sitting on a large spare cash pile, Top Glove chairman Tan Sri Lim Wee Chai (pic) said the group has made merger and acquisition (M&A) a priority. Lim, in fact, is making acquiring one company per year part of its key performance indicator.

“M&A activities are crucial for the survival of any corporation. In the past, Top Glove acquired companies such as GMP Medicare Sdn Bhd and [Medi-Flex Pte Ltd] and turned them into successful operations, and we will continue to scout for companies related to the glove industry,” Lim told reporters after a briefing on the group’s FY15 financial results yesterday.

He added that since Top Glove has a healthy balance sheet, the group has the capacity to fork out up to RM1 billion for acquisition activities.

“We will also set aside RM200 million in FY16 for organic growth, namely the expansion of our factories,” said Lim.

As at Aug 31, Top Glove’s cash balance was at RM288.2 million plus a short-term investment of RM527.9 million. The group’s borrowings totalled RM629.62 million. 

The group’s blueprint for expansion includes its factories F27 in Lukut, Port Dickson, F6 in Phuket, Thailand, and its new factory F30 in Klang, Selangor. The three factories are expected to churn out 7.8 billion pieces of gloves per annum by February 2017.

According to the presentation at the briefing, it has 25 glove factories, which run a total of 484 production lines producing 44.6 billion pieces per annum. By February 2017, the group targets to increase this to 26 glove factories with a total of 540 production lines producing 52.4 billion pieces a year.

The utilisation rates of its factories are currently at 100% for its nitrile glove production lines and around 90% for natural rubber glove production.

On the strengthening US dollar, Lim said “A strong US dollar would boost our performance, but then again volatility in the rates would also make it difficult for us in the sense we would need to renegotiate in terms of prices with our customers, and since we serve the global market, a strong US dollar also affects our customers in other countries [besides the US].”

He added that if the ringgit were to continue strengthening from its current level of 4.28 against the US dollar, this would not necessarily mean a decrease in profitability for Top Glove.

For FY15 ended Aug 31, Top Glove’s net profit jumped 55.2% to RM280.1 million from RM180.5 million a year ago. Earnings per share ballooned to 45.4 sen from 29.1 sen previously. Revenue expanded by 10.3% to RM2.51 billion in FY15 from RM2.28 billion a year ago.

“Our stellar results in FY15 were not only due to the exchange rate factor, but also attributed to our internal efforts; for 4Q15 we recorded 3.78 million glove pieces per employee, from 2.82 million pieces per employee in FY13. This is a 34% improvement in manpower efficiency thanks to our automation, reengineering and more efficient production lines.

“In the event that the ringgit does strengthen by 10%, it would mean that our internal efforts will be revamped by 10% to cover any potential shortfall in profit,” said Lim.

Top Glove shares gained 29 sen, or 3.3% yesterday to RM9.10, with a market capitalisation of RM5.65 billion. Year to date, its share price has doubled from RM4.38 at end-December last year.