Top Glove sinks into the red with $16.3m loss as orders slow, costs pile up

SINGAPORE – Top Glove Corporation, which manufactures disposable rubber gloves, sank into the red for the fourth quarter, as a slowdown in orders and mounting cost pressures continued to bite.

Net loss for the three months ended Aug 31, 2022, stood at RM52.6 million (S$16.3 million), reversing from a net profit of RM447.4 million posted in the same period a year ago. The results translate to loss per share of 0.66 sen, against earnings per share of 5.59 sen.

The softer financial performance also comes as the industry weathers an adjustment period, dealing with oversupply and excess stockpiling by customers during the pandemic, the group said in its financial results released on Tuesday.

“This has led to a slowdown in orders, setting average selling prices (ASPs) on a downward trend, which has been aggravated as customers adopt a ‘wait-and-see’ approach in anticipation of a further decline in ASPs,” the company added.

Its revenue for the fourth quarter fell 52.3 per cent to RM990.1 million from RM2.1 billion the year before.

Following a drop in ASPs, Top Glove said it had written down its inventory value to net realisable value by RM56 million in Q4 2022 and by RM229 million for FY2022. Furthermore, there was an escalation in cost structure due to global supply chain disruptions.

Domestically, Top Glove was affected by an estimated 60 per cent hike in natural gas tariff over the course of FY2022, and a 25 per cent increase in the Malaysian minimum wage from RM1,200 to RM1,500 which took effect in May 2022.

The company also experienced escalating costs which impacted its bottom line and was unable to pass on these costs to customers due to the current oversupply situation, it noted.

“The temporary oversupply situation and weaker demand has distorted the demand/supply mechanism and the group’s Q4 2022 performance is not reflective of our business or the sector’s true potential, both of which remain very promising in the longer term,” said Top Glove managing director Lim Cheong Guan.

The company’s board did not propose a dividend for the quarter under review.

Top Glove shares were trading 2.3 per cent lower at 22 cents at the close on Tuesday. THE BUSINESS TIMES