KUALA LUMPUR (March 9): Top Glove Corp Bhd’s share price slid 10.2%, or 19 sen to close at RM1.68 — the lowest since January 2020 — after the world’s largest glove maker announced that its quarterly net profit of RM87.55 million in the second financial quarter ended Feb 28, 2022 (2QFY22), was barely 3% of RM2.87 billion it made a year ago.
This is the third largest single-day fall on Top Glove’s share price since March 2020. The largest single day decline in Top Glove’s share price was on Dec 10, 2021 where the glove maker closed 10.37% lower at RM2.16.
Year to date, the stock has fallen 35% or 91 sen.
The quarterly profit came in below market expectation. The consensus view anticipated Top Glove to achieve quarterly net profit of RM150 million in 2QFY22, according to Bloomberg.
Top Glove’s market capitalisation stood at RM13.45 billion, based on the closing RM1.68. It is the 29th among the 30 KLCI Component Stocks in terms of market capitalisation.
The stock “gap down” in the afternoon session after the group's quarterly earnings announcement.
Top Glove attributed the earnings contraction to the lower average selling price (ASP) of disposable rubber gloves, describing it as the “normalisation” of ASP.
In the filing to Bursa Malaysia, Top Glove said its quarterly revenue declined marginally by 8.51% to RM1.45 billion for 2QFY22 from RM1.58 billion a year earlier, due to the normalisation of ASPs to pre-pandemic levels which had offset an uptick in sales volume.
For the first six-month period ended Feb 28, 2022 (1HFY22), the group’s net profit came in sharply lower at RM273.27 million, barely 5% of RM5.23 billion that it earned a year ago. Its six-month revenue slumped 70% to RM3.03 billion from RM10.12 billion.
Besides ASP normalisation, Top Glove said it had experienced margin compression because the drop in raw material prices was slower than the decline in ASPs.
Higher operating costs in utilities, manpower and chemical costs as well as intensified competition from new glove supply amid the global Covid-19 vaccination rollout have also caused pricing pressures to its bottom line, the statement read.
Top Glove added that it will remain cautious and scale back on expansion in the interim but continue to monitor the situation closely and be prepared to reinstate its expansion plans when demand picks up.