Top Glove raises prices, cites power tariff hike

by **Cals** Wed 08 Jan 2014, 07:32

Posted on 8 January 2014 - 05:41am

Liew Jia Teng
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Top Glove Chairman Tan Sri Lim Wee Chai during the media briefing and first quarter financial results at the Sime Darby Convention Centre, Kuala Lumpur. January 7, 2014. NORMAN HIU/ theSun.

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PETALING JAYA (Jan 8, 2014): Top Glove Corp Bhd expects its sales volume to grow by more than 10% in current financial year ending Aug 31 2014 (FY14), despite increasing gloves prices by 1%, said its founder and chairman Tan Sri Lim Wee Chai.

Since January this year, the world's largest rubber glove manufacturer raised the selling price for its gloves by 20 cents to US$20.20 per carton of 1,000 gloves from US$20. The price increase follows the Malaysian government's move to raise electricity rates.

The impact of the power tariff hike will be reflected in the group's financial result from second quarter of financial year ending Feb 28, 2014 (Q2 FY14) onwards.

As a result of the higher price, Lim acknowledged that "unhappy customers" to purchase gloves from rival producers from Thailand or Indonesia.

"Our customers will not be happy when we increase selling prices, as they always expect the prices to go down.

Therefore, we have to write many letters and explain to them. Indirectly, this is not productive and efficient for us to increase the price," Lim said.

Malaysian gloves are sold at 1% - 2% price premium compared to rivals across Asia, Lim said.

However, being the biggest producer of gloves in the world, Lim opined the Malaysian glove manufacturers can afford to maintain its premium price 2% higher than other countries, including Thailand, Vietnam, India and China.

"Despite the price hike, some companies still like to deal with us. This is due to our branding and quality value of the local glove makers," he added.

On top of that, he said Top Glove can count on its two glove factories in Thailand to mitigate the impact.

"Will Top Glove lose out? No, we still didn't feel it at the moment, as it might take some time. But before we feel it, we better do something," he said.

Recently Alliance Research stated that Top Glove was the worst performer among the four glove companies under its coverage. Top Glove recorded a 15.3% earnings contraction during the period between December 2012 to August 2013 due to margin squeeze from natural rubber (NR) glove.

Nevertheless, Lim said Top Glove is targeting a 10% to 15% growth in volume mainly driven by the group's capacity expansion as well as growing demand for nitrile gloves.

Top Glove will allocate RM180 million in capital expenditure this year to expand production capacity and improve efficiency.

On another note, Lim , who is also the vice president of Federation of Malaysian Manufacturers (FMM), said the government has not responded to the organisation's appeal to halve the planned electricity tariff hike for industrial users to an average 8% rise instead of the proposed 16.85%.

"We will continue to do our part to give feedback and make suggestion to the government, hopefully they will consider other options (instead of electricity tariff hike) to cut down the expenditure," he said.

On the recent flu outbreak in the US, Wee Chai said despite the demand for rubber gloves may increase, Top Glove does not foresee a significant impact from this "yearly affair".

"Unlike last time, today's supply base is very big, and the US has imported many gloves for standby already. Hence, this small outbreak will not affect much on us," he added.
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