Top Glove says Q2 growth indicates glove demand will pick up

SHAH ALAM, Malaysia—Top Glove Corp. has reported a second quarter of growth in sales volumes and strengthening of earnings over the previous quarter and year.

For the three months ended Feb. 29, the group posted sales of $116 million (RM 550 million), an increase of 12 percent from $104 million in the preceding quarter.

Second-quarter sales, however, remained 11-percent down compared to the same period last year, Top Glove reported March 20.

Earnings (EBITDA) strengthened to $6.1 million, a 38-percent improvement against the first quarter of the year, and up from a loss of $12.4 million reported last year.

Sales volumes strengthened by 18 percent sequentially, providing "a good indication that glove demand is picking up strongly on the back of excess inventory depletion."

During the quarter, Top Glove said natural rubber latex concentrate prices rose at a much faster rate: from an average of $1.04/kg at the end of November 2023 to $1.19/kg at the end of February 2024.

The spike of 15 percent in prices, according to the company, led to a "mismatch" with average selling prices (ASPs), thereby affecting margins.

The growth in volumes, however, helped increase utilization rates, thereby improving production and cost efficiency, which Top Glove said mitigated the higher costs.

On a half yearly basis, the group registered revenue of $219 million, down 17 percent from $263 million reported last year.

The group also narrowed loss after tax to $18.4 million, contracting by 72 percent year-on-year.

First-half earnings also stayed positive, improving 140 percent to $10.5 million year-on-year.

The group linked its "steady recovery" to stronger sales volumes, as customers placed new orders following the depletion of excess inventory.

The uptrend in sales orders was further spurred by the progressively narrowing price gap, which has seen Top Glove achieve parity in ASPs with its overseas peers.

The uptick in orders that boosted production utilization resulted in enhanced production and cost efficiency, impacting the bottom line positively.

The group expects to achieve improved results as it continues its ongoing quality and cost optimization initiatives.

With fundamentals remaining robust, the group continues to see signs of the market rebounding and expects the business will normalize in due course, Managing Director Lim Cheong Guan said.

Having gained momentum over the last few quarters, he added, the group expects to "sustain the positive trajectory and return to profitability within the second half of the year."

Top Glove, according to Lim, views the 18-percent quarter-on-quarter growth volume as "an encouraging sign" toward recovery.

In addition to the depleting glove stockpiles, the manufacturer expects global glove demand to grow 8 percent per year in the near future. These trends, Top Glove said, will absorb excess capacity within the industry, while manufacturers continue to halt expansion towards restoring the demand supply balance.