KUALA LUMPUR: Top Glove Corp, the world’s largest rubber glove maker that reported a 99% plunge in quarterly profit, said it will put its expansion plans on hold as the lifting of Covid-era curbs cools demand for protective gear.
The company, which makes one out of every five gloves in the world, said higher wages and elevated oil prices are weighing on margins as it is unable to pass on the costs to customers due to an oversupply situation.
“The current set of results are not reflective of our growth potential due to the transition period coupled with the demand-supply imbalance,” executive director Lim Cheong Guan said at a briefing on Thursday, adding that the company continues to align its expansion plans with market conditions.
Top Glove in December said it planned to double its total production capacity to 201 billion gloves per annum by end of 2025, as it expects global demand to expand at more than 10% annually even after the pandemic recedes.
But six months into 2022, the outlook for glove makers has dimmed as borders reopen, trade resumes and the world learns to live with the Covid-19 virus.
The company’s shares have shed more than 50% this year to slide to near the lowest level since December 2017. That puts it at risk of being removed from the main KLCI index in the gauge’s semi-annual review expected in December, according to Hong Leong Investment Bank.
Shares of rival Hartalega Holdings Bhd have fallen more than 30% in 2022.
Top Glove said it expects the challenging business environment to persist in the near term, adding that the oversupply situation will ease gradually as major players delay their expansion plans and some newer entrants shutter plants.
“I expect the fourth-quarter results to be close to the third quarter, almost close to the bottom,” executive chairman Lim Wee Chai said at the briefing.
Net income fell to RM15.3 million in the third quarter ended May, the smallest quarterly profit since 2005. Revenue slumped 65% to RM1.5 billion. - FMT
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