Top Glove narrows fiscal Q3 loss, expects 'uptick' in glove demand

SHAH ALAM, Malaysia—Top Glove Corp. Bhd. has narrowed its loss in the third quarter of fiscal 2023, due mainly to improved average selling prices (ASPs) as well as its ongoing quality and optimization plans.

For the quarter ended May 31, the group registered revenue of $114 million, down 64 percent compared to the year before, Top Glove said June 16.

Loss after tax came in at $25.8 million, an improvement of 23 percent compared to a $33 million loss reported in the previous quarter.

The figure, however, was substantially lower than a profit of $6.2 million reported in the third quarter of 2022.

The group said it improved its "overall operating performance" amidst a challenging business landscape, due in part to a 6-percent increase in ASPs.

Furthermore, it linked the improvement to "quality and cost optimization initiatives to streamline operations."

The measures employed included "decommissioning obsolete production lines and temporarily stopping production at 17 out of its 49 factories," Top Glove said.

According to the glove maker, the decommissioning reduced the group's production capacity by 5 billion pieces, bringing its total production capacity to 95 billion pieces of gloves per year.

In addition, the group said it implemented a "manpower restructuring exercise," but it did not elaborate further.

The measures fall within Top Glove's six-point "comeback strategy," which involves boosting volumes, enhancing quality, consolidating facilities, enhancing "people productivity," strengthening cash flow and optimizing supply chain.

The optimization of supply chain, Top Glove said, will have "a pivotal role" in revitalizing the group.

"While we may be in a loss position, it is encouraging that the quantum of operational losses has reduced from the previous quarter," said Lim Cheong Guan, managing director.

Top Glove, Lim added, will "navigate the challenging business environment" through a series of measures aimed at improving sales, eliminating waste, trimming expenditures and streamlining processes.

The group's "rationalization exercise" and the temporary production halts were aimed at addressing the oversupply situation, Lim said.

"(It) was an important step towards the group's continual endurance and competitiveness in the long term," he added.

Meanwhile, Top Glove has been at the forefront of a campaign to increase the sales prices for rubber gloves, despite its impact on volumes.

"As glove manufacturers are unable to fully absorb rising costs indefinitely, this (raising prices) is a necessary step for the lon- term sustainability of the glove industry," the company said.

For the short-term outlook, Top Glove said the business environment is expected to remain "challenging and competitive" throughout the second half of 2023.

However, the group is optimistic on long term prospects as gloves continue to be "an essential item" for single usage in the health care and food industries.

"While there has been oversupply and customer stockpiling over the past two years, it is important to note that glove consumption itself has not decreased," said Lim.

On the contrary, Lim said, glove consumption has gone up post-pandemic, on the back of elevated hygiene and health awareness.

"As customers' and manufacturers' glove inventory is close to depletion, replenishment activity is expected to commence in the second half of calendar year 2023, spurring an uptick in glove demand," Lim said.