PETALING JAYA: Top Glove Corp Bhd hopes to turn profitable by the end of financial year 2024 on rising global demand for gloves following the clearance of excess stock held by buyers.
The company, however, expects average selling prices (ASPs) and raw material prices to fluctuate in the near future while anticipating an upward trend in natural gas tariff.
Managing director Lim Cheong Guan said prices for nitrile latex are predicted to fall by 5%, while prices of natural rubber latex is anticipated to rise by 4% in January next year.
Natural gas prices are expected to hike by 3% for February next year as the winter season hits global demand.
On a positive note, he said the group will be able to bear the price increase and pass it through to end buyers if the price hike is made gradually.
An improvement in margin is also foreseen following an increase in glove demand, as well as the ASP gap with global players becoming much smaller or nearly at par.
He added that moving forward, glove manufacturers will have some pricing power due to factors like fluctuating raw material prices and increased margin from improved capacity utilisation.
“We are very confident that 2024 will be a better year, and we have already started the year with better performance in the first quarter of financial year 2024 (1Q24).
““Sales volume growth will be the major indicator and as a big manufacturer with big capacity, we need to increase our sales volume and utilisation as well,” he said.
Cheong added that the group does not foresee an increase in capital expenditure in the near term.
“We will review from time to time according to market demand,” he said, adding that one of Top Glove’s main focus for FY24 is cost improvement.
On the subject of cost-cutting measures, he said with the order trend increasing, the group will be expanding its capacity to meet the growing demand for gloves.
“If we are running at a lower utilisation rate, it will definitely not be efficient because we will have an excess in manpower.
“If utilisation increases, it will be more efficient and that will help in terms of the performance,” he said.
Top Glove recorded a 4% quarter-on-quarter increase in revenue to RM493.46mil for its 1Q24 ended Nov 31, 2023, with a narrowed net loss of RM57.7mil versus a net loss of RM168mil in 1Q23.
The glove manufacturer, however, reported a positive earnings before interest, taxes, depreciation and amortisation of RM21mil, an increase of 320% from the previous quarter, as well as a total positive cash inflow from operations of RM17mil.
The improved results were attributable to its ongoing operational, quality and cost optimisation efforts which helped offset the increase in raw material prices for the past few quarters.
“The uptick in sales volume which led to increased utilisation and efficiencies also had a positive effect on the bottom line,” it stated.
“As the upward trend in sales order persists and utilisation goes up, we have every reason to be hopeful of turning profitable,” Cheong stated.
The group’s orderbook saw a significant increase by 30-40% as compared to the past few months while ASP in the quarter fell by 8%.
This was attributed mainly to lower raw material prices at the end of 4Q23, which was completely reflected in 1Q24, which then caused a slight delay in ASP pass through.
Despite raw material prices going up during the quarter, this was mitigated by lower natural gas prices, which came down by 8% as well as higher production utilisation in 1Q24, which then improved cost efficiency.
Source: The Star