Business

Wednesday April 15, 2009

Top Glove expects higher Q3 revenue

By K.C LAW


The company’s orders picked up since last month

KUALA LUMPUR: Top Glove Corp Bhd, the world’s largest rubber glove manufacturer, says orders for its products have picked up since last month, and expects the momentum to continue.

Executive director Lim Cheong Guan projected revenue for the third quarter ending May 31 to be higher than the preceding quarter.

“The percentage of increase would be about the same as the second quarter over the first quarter,” he told a press briefing yesterday.

“Due to closure of some competitors (as a result of the global financial crisis), some big buyers have come to us,” he said, adding that increasing awareness of healthcare and government spending in the Middle East, China, India and Brazil had also helped boost demand.

From left: Lee Kim Meow, Tan Sri Dr Lim Wee Chai and Lim Cheong Guan at the press briefing on Tuesday.

Managing director Lee Kim Meow said that the reduction of electricity and natural gas prices, effective March 1, would cut production cost by 3%.

Top Glove will also appeal against the extra levy charges on foreign workers, which would cost the company an additional 0.5% in operation cost.

Recently, Top Glove obtained the Brazilian National Standards Organisation certificate, which is responsible for technical standards in Brazil.

The company planned to grow its market share in Brazil to 40% this year from 30% now. Currently, the company exports US$3mil to US$4mil worth of products, or about 50 containers per month, to Brazil.

Top Glove will maintain a 30% dividend payout ratio for the financial year ending Aug 31 (FY09). Total capital expenditure for FY09 is expected at RM60mil, where RM44mil had been spent during the first half.

The company has a very healthy balance sheet with a net cash of 5.3%, or RM39.6mil, compared with its peers, with some having up to 90.5% gearing ratio.

Over the last 10 years, Top Glove had been growing at an average of 30% compounded annual growth rate.

Asked whether the company would aggressively make acquisitions amid its healthy cash flow, chairman Tan Sri Dr Lim Wee Chai said the company would be cautious.

“Although we have pressure to grow, stability is more important. It is easy to acquire a company using cash but to maintain profitability is not easy,” he said.

He also ruled out diversification into the condom business, saying: “Condom needs a different set of skills although the technology is quite similar. Bottom line (net profit) is more important than top line (revenue).”

Top Glove has 17 glove factories and two latex concentrate plants, operating 339 production lines with a production capacity of 30 billion pieces of gloves per annum.

Its two latex concentrate plants in Thailand supply 50% of its latex concentrate materials.

 
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