Top Glove reports dramatic decline in sales, profits

SHAH ALAM, Malaysia—Top Glove Corp. Bhd. has seen a dramatic decline in sales and profits over the past nine months, due mainly to higher costs and slower demand.

The gloves manufacturer reported sales of $332 million during the third quarter of its financial year, down 64 percent from $945 million reported last year.

Profit before tax for the three months to the end of May fell more than 98 percent to $8.6 million, down from $591 million, Top Glove said in a June 9 release.

Over the nine-month period, Top Glove saw profit before tax fall more than 95 percent to $93 million, from $2.1 billion reported the year before.

Sales for the period fell more than 68 percent to $1.02 billion, down from $3.18 billion in 2021.

Top Glove linked the softer performance to "a convergence of headwinds," with production costs going up due to global inflation and the rise in crude oil prices following Russia's war on Ukraine.

Additionally, the group said it faced increases in natural gas and electricity tariffs, while having to comply with higher minimum wage obligations, which came into effect May 1.

"The escalating costs resulted in margin compression, as the group was unable to fully pass cost through amidst the ongoing oversupply situation," said Top Glove.

However, average selling prices of gloves are declining at a far slower pace, which Top Glove said will help cushion the cost impact going forward.

In addition, the company said sales to the U.S. from Malaysia continued to trend higher in the third quarter, increasing by 8 percent compared to the prior quarter.

As a result, the gloves maker increased volumes 6 percent quarter-on-quarter during the three months to the end of May.

"This is an extremely challenging time for the glove industry," said Dato' Lee Kim Meow, managing director.

This quarter's results, he continued, are not reflective of the group's usual business performance, mainly due to the ongoing normalization trend coupled with demand supply imbalance.

With demand moderating, Top Glove said it had "deferred and reduced" its major capex for the immediate term, aligning its expansion plans with market conditions.

In terms of outlook, Top Glove said it expected the challenging business environment to persist in the near term, but emphasized the situation is "a temporary setback."

"Top Glove believes that the outlook for the glove industry is still promising as gloves remain an essential item in the health care sector," said Dato' Lee.

Demand, he said, is expected to continue to grow with increased usage from emerging markets where the glove consumption base is relatively low.