Top Glove closes last quarter of FY22 in the red with a net loss of RM53m

KUALA LUMPUR (September 20): Top Glove Corp Bhd closed the last quarter of its fiscal year ended August 31, 2022 (FY22) in the red, as costs escalated as demand and selling prices normalized means (ASP) for the gloves have eaten into his winnings.

For the fourth quarter ended August 31, 2022 (4QFY22), Top Glove reported a net loss of RM52.59 million compared to a net profit of RM447.4 million last year, according to the manufacturer’s filing of gloves Bursa Malaysia on Tuesday September 20th. ).

As a result, the group recorded a loss per share of 0.66 sen against earnings per share of 5.59 sen in 4QFY21. Revenue for the quarter fell 52.28% to RM990.1 million from RM2.07 billion last year.

4QFY22’s net loss caused its FY22 year-to-date net profit to drop 96.94% to just RM235.97 million from RM7.71 billion a year earlier. Full year revenue also fell by 65.94% to RM5.57 billion from RM16.36 billion in FY21.

In a statement, Top Glove said the dismal financial performance came as the glove industry is going through a period of adjustment – where it faces the twin factors of oversupply and excessive stockpiling by customers during the Covid-19 pandemic.

“This has led to a slowdown in orders, putting ASPs on a downward trend, which has been compounded as customers take a ‘wait and see’ approach in anticipation of a further drop in ASPs,” he said. -he declares.

Following the decline in ASPs, the group also wrote down its inventory value to its net realizable value by RM56 million in 4QFY22 and RM229 million for FY22.

Additionally, Top Glove said the group has seen an escalation in the cost structure attributed to disruptions in the global supply chain.

“On the home front, [the group] was impacted by an approximately 60% increase in natural gas tariffs in FY22, as well as a 25% increase in the Malaysian minimum wage from RM1,200 to RM1,500.

“The escalation of costs, which the group is unable to pass on to customers in the context of current oversupply, has had an impact on its results,” he added.

The latest quarterly loss “a temporary setback”

Commenting on the group’s financial results, Top Glove general manager Lim Cheong Guan said the oversupply situation and lower demand for gloves that distorted the industry’s supply and demand mechanism are temporary. .

He added that the group’s performance in 4QFY22 does not reflect the true potential of its business and its sector, noting that the loss position it finds itself in is a “temporary setback” and is confident that the industry will recover. .

Top Glove said it has mitigation measures in place, including deferring all capital expenditures for new capacity to 2023 in light of lower utilization levels, in line with its primary goal of operational efficiency and streamlining. costs in the future.

“[The group] also set about streamlining facilities, focusing on improving those that produce its internal materials supply. Additionally, Top Glove continues to work with its suppliers to ensure more cost-effective sourcing for a win-win outcome,” he added.

The group noted that, alongside this, it plans to focus its efforts on resuming sales in the United States, promoting more profitable products, while developing value-added products and improving its green product line.

Despite the oversupply situation, Top Glove said it remains confident that once customer stocks are depleted and glove restocking activity resumes, the market will stabilize and be better positioned to absorb supply. extra from the new capacity.

“As the glove industry is estimated to be operating at less than 50% utilization, the supply of gloves is expected to decline accordingly. The group expects industry consolidation to follow, further reducing the supply of gloves and paving the way for recovery.

“Despite the challenging environment, Top Glove remains true to its commitment to doing well and delivering value to its stakeholders across the sustainability spectrum,” he added.

At the lunch break, shares of Top Glove were trading half a sen or 0.71% lower at 70 sen, giving the group a market capitalization of RM5.71 billion. He saw 16.1 million shares change hands, putting him among the most active counters on the local exchange.

Read also:
Top Glove slumps after posting first quarterly loss since listing in 2001

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