Top Glove Corporation Bhd, a leading global manufacturer of gloves, announced its financial results for the third quarter ended May 31, 2023 (3QFY2023).
The company showcased an improved set of results with a decline in sequential operational losses, driven by increased average selling prices (ASPs) and ongoing quality and cost optimization measures.
During 3QFY2023, Top Glove achieved sales revenue of RM531 million. The loss after tax was reported at RM120 million, showing improvement compared to the loss after tax of RM155 million in the previous quarter (2QFY2023).
Despite facing a challenging business landscape, Top Glove’s overall operating performance improved as the loss after tax was reduced by 23 percent from the previous financial quarter. This improvement can be attributed to a six percent increase in glove ASPs and various quality and cost optimization initiatives. The company implemented measures such as decommissioning obsolete production lines and temporarily stopping production at 17 out of its 49 factories to align with the softer global glove demand. These measures reduced the group’s production capacity by five billion pieces of gloves, bringing the total production capacity to 95 billion pieces.
In addition to the operational improvements, Top Glove also faced fluctuations in raw material prices. Natural latex concentrate prices increased by two percent to RM4.78/kg, while nitrile latex prices rose by seven percent to USD0.92/kg. However, the price of natural gas decreased by 14 percent from RM67.16/MMBtu to RM57.74/MMBtu.
Top Glove acknowledges that being at the forefront of a glove price increase may impact its sales volume. Nevertheless, the company deems this step necessary for the long-term sustainability of the glove industry. Other industry players have also followed suit as glove manufacturers cannot absorb rising costs indefinitely.
To chart its path to recovery, Top Glove has implemented a six-point comeback strategy called the Top Glove Turnaround Plan (T6). This plan aims to boost sales volume, enhance quality, consolidate facilities, improve people productivity, strengthen the cash flow position, and optimize the supply chain. The company believes that T6 will play a pivotal role in revitalizing the group.
Lim Cheong Guan, Managing Director of Top Glove, expressed encouragement regarding the reduction in operational losses and emphasized the importance of the T6 strategy in navigating the challenging business environment. He highlighted the company’s commitment to improving sales revenue, enhancing quality, eliminating wastage, optimizing resource allocation, trimming expenditures, and streamlining processes for greater financial efficiency and sustainability.
Top Glove recently conducted a workforce rationalization exercise to address the glove oversupply situation. While a difficult decision, it was deemed crucial for the company’s long-term endurance and competitiveness. The management expressed deep appreciation for the contributions of all employees.
The company remains dedicated to upholding the United Nations Guiding Principles on Business and Human Rights (BHR) and has implemented BHR and Traceability training for vendors to ensure a robust supply chain. Despite expecting a challenging and competitive business environment in the second half of 2023, Top Glove is optimistic about the long-term prospects of the glove industry. Gloves continue to be essential items for single usage in the healthcare and food industries.
Lim emphasized that while oversupply and customer stockpiling occurred over the past two years, glove consumption itself has not decreased. On the contrary, glove consumption has increased due to heightened hygiene and health awareness in the post-pandemic era. The company anticipates a replenishment activity in the second half of 2023, leading to an uptick in glove demand. With the T6 initiatives and measured increases in ASPs, Top Glove is hopeful for a steady improvement and better days ahead.
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