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Top Glove reports $16.3 mil loss in 4QFY2022 amid slowdown in orders, lower ASPs

Felicia Tan
Felicia Tan9/20/2022 05:19 PM GMT+08  • 4 min read
Top Glove reports $16.3 mil loss in 4QFY2022 amid slowdown in orders, lower ASPs
The glove maker saw a 96.9% y-o-y plunge in FY2022’s earnings of $73.1 million. Photo: Bloomberg
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Top Glove has reported a loss of RM52.6 million ($16.3 million) for the 4QFY2022 ended August, compared to earnings of RM447.4 million.

This brings the glove maker’s total earnings to RM236.0 million for the FY2022, 96.9% down from its previous year’s earnings of RM7.71 billion.

In the 4QFY2022, loss per share stood at 0.65 sen on a diluted basis while earnings per share (EPS) for the FY2022 stood at 2.91 sen on a diluted basis.

The earnings plunge reflects the industry’s adjustment period, which saw an oversupply of gloves leading to a slowdown in orders, as well as lower average selling prices (ASPs). In addition, the group saw an escalation in cost structure attributed to the global supply chain disruptions. The group says it was unable to pass on the escalating costs to its customers amid the ongoing oversupply situation, which thus impacted its bottom line.

Furthermore, following the decline in ASPs, the group says it has also written down its inventory value to net realisable value by RM56 million in 4QFY2022 and by RM229 million for FY2022.

During the 4QFY2022, revenue fell by 52.3% y-o-y to RM990.1 million while FY2022 revenue fell 65.9% y-o-y to RM5.57 billion.

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4QFY2022 also saw a loss before tax of RM44.0 million from the profit before tax of RM620.6 million in the corresponding period before. In the FY2022, profit before tax plunged by 96.4% y-o-y to RM365.5 million.

As at Aug 31, cash and cash equivalents stood at RM439.9 million, down 49.7% y-o-y.

“The glove industry has been facing strong headwinds over the last year. The temporary oversupply situation and weaker demand has distorted the demand/supply mechanism and the group’s 4QFY2022 performance is not reflective of our business or the sector’s true potential, both of which remain very promising in the longer term”, says Lim Cheong Guan, Top Glove’s managing director.

See also: Banyan Tree announces improved earnings in business update

“We have delivered exceptionally strong profits over the last two years and are now going through a period of normalisation as glove demand/supply stabilises. We accept this as part of being in the glove business, mindful that our loss position this quarter is a temporary setback, and are confident the industry will recover eventually,” he adds.

Looking ahead, the group says it will be focusing on its operational efficiency and cost rationalisation in a bid to navigate through this challenging period.

It has also deferred all capex for new capacity in 2023 in view of lower utilisation levels.It has also deferred all capex for new capacity in 2023 in view of lower utilisation levels.

Despite the oversupply situation, Top Glove says it remains confident that once customers’ stockpiles are depleted and glove restocking activity resumes, the market will stabilise and be better positioned to absorb the additional supply from new capacity.

As the glove industry is estimated to be running at below 50% utilisation, glove supply is expected to reduce accordingly. In addition, the group anticipates that industry consolidation will follow, further reducing glove supply and paving the way for recovery.

“Based on our industry experience, a period of adjustment is to be expected after each pandemic. Owing to the ‘perfect storm’ of normalising demand and ASPs, alongside increased production capacity however, the recovery timeline is more protracted than usual”, says Lim.

He adds that the group is “optimistic” that the “storm will pass”.

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“Once the demand /supply mechanism rebalances, we will see glove demand resuming its 10% growth per annum as projected by the Malaysian Rubber Glove Manufacturers Association (MARGMA), in line with actual consumption which is underpinned by rising usage and hygiene awareness,” he continues. “The industry’s fundamentals remain intact as there are no structural changes to the industry; gloves remain an essential item in the medical sector with no viable replacement, and are also disposable which means demand is recurring.”

In a separate announcement, Top Glove says it intends to seek its shareholders’ approval to renew their mandate to purchase its own shares up to ten percent (10%) of its issued and paid-up capital at the upcoming 24th annual general meeting (AGM).

Shares in Top Glove closed 0.5 cent lower or 2.27% down at 21.5 cents on Sept 20.

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