Top Glove 4Q net profit falls 42% to RM26.09m

KUALA LUMPUR: TOP GLOVE CORPORATION BHD [] net profit for the fourth quarter ended Aug 31, 2011 fell 42% to RM26.09 million from RM45.01 million a year earlier, due mainly to high latex prices, weaker US dollar and oversupply situation.

It said on Tuesday, Oct 11 that revenue for the quarter edged up to RM541.84 million from RM541.39 million in 2010.

Earnings per share fell to 4.22 sen from 7.30 sen in 2010, while net assets per share was RM1.85.

Top Glove proposed a single tier final dividend of net six sen per share.

For the financial year ended Aug 31, Top Glove’s net profit fell 53.86% to RM113.14 million from RM245.23 million in 2010, on the back of revenue RM2.05 billion.

Reviewing its performance, Top Glove group chairman Tan Sri Lim Wee Chai in a statement said that despite the weaker profit, the group's earnings was still positive and its cash position remained strong.

He said the management had taken serious measures to tackle these headwinds and had succeeded in reducing their impact.

Lim said Top Glove continued to share some of these higher costs with its customers and hedge its open foreign exchange position, adding that it was focused on planning for the longer term.

In order to mitigate the volatility in latex costs in the future, Top Glove had been working on acquiring land in Cambodia, Malaysia and Indonesia, for rubber PLANTATION [] development to meet its own latex needs, he said.

“We are still in the process of securing the land, as the land approval process has taken far longer than expected.

“We will continue to look for land as we need at least 40,000 ha to 50,000 ha of land to supply at least 50% of our latex requirements, including requirements from our new factories in the future,” he said.

Lim also said Top Glove had been increasing the production of nitrile gloves to avoid over-reliance on natural rubber gloves.

“Our nitrile glove business is doing well and is increasing. Contribution of nitrile glove sales to our total sales volume increased from 7% in Q1 to 14% in Q4. We are targeting for at least 15% to 17% contribution from nitrile gloves by December 2011,” said Lim.

He said Top Glove’s current capacity expansion projects were mainly to cater to the demand for nitrile gloves, adding that by the end of May 2012, with the factory expansions and the completion of new facilities, the total croup capacity would have increased to around 41.55 billion pieces of gloves per annum.

Top Glove is also investing in more highly automated production lines to ensure more efficient production of consistently high quality products, he said.

On the removal of subsidies on gas, Lim said Top Glove would continue to diversify its sources of energy to avoid over-reliance on natural gas, and going forward, all its new factories would be utilising biomass fuel instead of natural gas.

On the future outlook, Lim said Top Glove expects the business landscape to remain challenging with the volatility in the global economic sentiment, commodity prices and foreign exchange, being the major causes for concern.