KUALA LUMPUR (March 16): Top Glove Corporation Bhd has targeted a growth of 20%–30% for the financial year ending Aug 31, 2016 (FY16). The glove maker is also eyeing one or two merger and acquisition (M&A) opportunities amid intensified competition in the nitrile glove segment as major industry players expand their capacity.

Its managing director Lee Kim Meow welcomed the stronger competition, saying the more efficient player will stand out.

"Top Glove has been focusing a lot on improvements in efficiency with continuous upgrading on existing production lines, newest factory equipped with advanced technology production line, and improvement in manpower efficiency with automation and reengineering," he said in a conference call today after the company announced its second quarter results.

The improvement in efficiency could be seen from the rise in the average number of gloves produced by each employee per year. The output in FY15 was 3.76 million pieces per employee against 3.08 million pieces per employee in FY13, a growth of 22.08%.

In the first half of FY16, it improved further to 3.84 million pieces per employee per year while the industry only managed 2.5 million pieces.

Top Glove earlier announced its second quarter results, which saw its net profit surge 86.6% to RM104.61 million or 8.36 sen per share, from RM56.07 million or 4.51 sen per share for the previous corresponding quarter.

Lee said the outlook was optimistic as the growth in 1HFY16 itself represented a 31.1% growth in sales and more than 100% growth in profit before tax, in comparison to the first half of FY15.

While competition in the nitrile glove segment has grown, Top Glove is confident the demand is still very good and the double-digit growth could be sustained.

"The group is resilient to external economic turmoil as 80% of products are for the medical sector," Lee added.

Lee also mentioned that there will be minimal impact from the hike in minimum wage.

Given that the labour costs represent about 10% of the expenses, the 10% hike in minimum wage will translate into an increased cost of about 1%. And the ongoing improved automation will offset the effect of the hike, he added.

While there has been an increase in the price of raw material recently, Lee said there will not be a rise in average selling price unless the upward trend is definite. "This is to ensure there will be minimal interruption for our customers," he said in reply to a question during the conference call.

On its M&A opportunities, Lee said the group is always open for M&A and is in negotiations at this stage. But he added the company "should be able to acquire one or two glove companies this year".

In the conference call, Lee also said the secondary listing of Top Glove on the Singapore Exchange will provide shareholders the option of transferring their shares to Singapore to trade and vice versa.

He is optimistic this will enhance Top Glove's investor reach and diversify its investor base.

The listing in Singapore is expected to be at the end of June tentatively.

At the close of trading today, Top Glove shares were down by 2.26% at RM5.20 with 8.017 million shares traded.