Top Glove reports 'better performance' in Q4, expects market recovery

SHAH ALAM, Malaysia – Top Glove Corp. Bhd. expects a recovery in the rubber gloves market on the back of encouraging trends in the final quarter of its fiscal 2023, ended Aug. 31.

"We are already seeing an uptick in sales volume month-to-month, which indicates our customers' glove inventory is close to being depleted," Top Glove reported Oct. 6.

With oversupply now easing, the Malaysian group anticipates global gloves demand to return to a projected growth-path of 8-10 percent in the medium-term.

Nevertheless, for the final quarter of the year, Top Glove reported a year-on-year revenue decline of 52 percent to $100.8 million (RM 476 million).

During the fourth quarter, loss-after-tax reached $96.2 million, compared to a profit of about $110 million in the same period of last year.

Excluding a $82 million impairment cost, Top Glove said its quarterly loss would have stood at $13.8 million.

The final quarter also saw sales volumes dip slightly quarter-on-quarter, while average selling prices also declined amid lower raw material prices.

On a 12-month basis, the group reported a loss-after-tax of about $188 million, down from a prior-year profit of $60 million, on sales 59-percent lower at $476.8 million.

For the final quarter, Top Glove attributed the "better performance" compared to previous quarters of 2023, to "ongoing quality and cost optimization initiatives."

These included streamlining its production facilities, which saw the group using newer and more efficient factories while temporarily ceasing operations elsewhere.

The efficiency program, it said, reduced operational, utility and manpower costs significantly, while new orders generated "positive cash flow and better margins."

Top Glove's "turnaround plan" has included measures such as "decommissioning obsolete production lines and temporarily stopping production at 17 out of its 49 factories."

As previously reported, the move has reduced the overall production capacity by 5 billion pieces, bringing total output capacity to 95 billion pieces of gloves per year.

Overall, managing director Lim Cheong Guan said Top Glove delivered an "encouraging performance in the uncertain environment that continues to impact the gloves industry."

"Looking ahead, the group believes that inventory build-up from the pandemic is very close to bottoming out following lower glove demand over the past two years," Lim said.

Furthermore, the official noted that glove consumption had increased post-pandemic on the back of elevated levels of hygiene and health awareness.

"With this, we believe that glove demand will pick up gradually going forward," Lim added.

On the costs front, Top Glove said the high cost of natural gas rendered Malaysian rubber glove makers less competitive than rivals elsewhere. The group suggested that rather than exporting natural gas, the resource should be made available "at a competitive price" to Malaysian manufacturers.