Top Glove reports 4.4% higher 1Q earnings of $36 mil on strong global demand
SINGAPORE (Dec 17): Top Glove Corporation, the Malaysian glove maker which has admitted breaching labour laws after some migrants were found working illegal overtime, reported a 4.4% increase in 1Q19 earnings ended Nov to RM110 million ($36.2 million) from RM106 million a year ago.
See: Malaysian authorities to take action against Top Glove over migrants' illegal overtime
Total revenue for 1Q19 came in at a quarterly record of RM1.26 billion, representing an increase of 34.5% compared with 1Q18.
Profit before tax and profit after tax also came in at RM141.9 million and RM111.7 million, up 16.3% and 5.5% respectively from last year.
The group also recorded solid sales volume growth of 19% year-on-year.
On a quarter-on-quarter comparison, sales revenue grew 3.7% as sales volume rose 1%. Meanwhile, profit after tax was 8.9% higher than 4Q18.
Top Glove says strong demand growth, both in developed and emerging markets, accounted for the robust sales figures.
Additional capacity available from newly completed factories coupled with higher utilisation, as well as ongoing operational improvements, also resulted in better efficiency.
Meanwhile, lower average raw material prices also boosted margins and profitability, with EBIDTA margins improving to 16.3% from 16.1% in 1Q18.
However, higher interest costs from the funding for M&As and organic expansion, and a lower contribution from the vinyl glove segment following intensifying competition in the vinyl glove segment as supply from China normalised, resulted in a softer profit before tax margin for the quarter.
Raw material prices were mixed. The average price for natural rubber latex was RM3.78/kg, 24% and 11% lower than 1Q18 and 4Q18 respectively. Meanwhile, the average nitrile latex price surged 24% to US$1.26/kg ($1.73/kg), year-on-year but decreased 4% versus the previous quarter.
In its outlook, Top Glove expects the business environment to continue being challenging in the new year, in view of intensifying competition and cost increases, such as the impending increase in minimum wage effective January. However, it believes industry prospects remain promising given that glove usage is still on the rise, particularly in emerging countries and set to grow by 10% every year.
See: US hygiene push could fuel a rubber glove boom half a world away
Ongoing efforts are in place to improve the performance of Aspion.
See: Top Glove plunges 70 cents on alleged $240 mil overstatement of Aspion acquisition
See also: Top Glove downgraded by Maybank as acquisition hits a snag
Meanwhile, employee well-being continues to be a foremost priority at Top Glove. “We acknowledge that our people have been instrumental to our success thus far and will continue to be the most important factor in achieving our Fortune Global 500 Dream. We recognise there are areas we can improve on and are committed to doing so, particularly in terms of health and working environment,” says the company in its Monday night filing.
Malaysia’s labour ministry said Top Glove could face a fine of up to RM 10,000 ($3,293) if found guilty of breaching labour laws on excessive overtime.
Year to date, shares in Top Glove are up 41% to close at $1.98 on Monday.
