TOP Glove Corporation recorded a RM3.6 million (S$1.1 million) net loss for its fourth quarter ended Aug 31, narrowing losses from the RM461.7 million net loss clocked in Q4 of the previous year.
The glove manufacturer on Thursday (Oct 10) said losses shrank year on year on higher sales volume as customers continued to replenish their glove inventories, which improved utilisation rates and cost efficiency. This translated to a loss per share of 0.04 sen compared with last year’s loss of 5.76 sen per share.
However, the loss in Q4 was a reversal from the RM50.7 million profit it turned in Q3. The quarter-on-quarter decline was attributed to the US dollar’s sudden weakening against the ringgit.
Revenue for the fourth quarter was 75.5 per cent higher year on year at RM835.3 million, up from RM476.1 million in Q4 of FY2023.
This was due to Q4 of FY2024 seeing a 91 per cent surge in sales volume compared with the same period last year.
Lim Cheong Guan, Top Glove’s managing director, said on Thursday that the company was disappointed by its latest results.
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Sales had been on an uptrend quarterly, with signs pointing to a return to the black for Q4. “But then, in an unexpected twist of fate, the US dollar weakened on the back of interest rate cuts and our hopes of a turnaround in the fourth quarter did not materialise,” said Lim, who was speaking at the company’s earnings briefing.
He said that Top Glove has a natural hedge, and also conducts forward hedging to minimise the impact of fluctuations in the dollar on its earnings.
However, as the weakening of the dollar against the Malaysian ringgit in August was “sudden”, falling almost 8 per cent, Top Glove’s revenue collection for the month was affected. This resulted in a foreign currency translation difference of RM26 billion on its foreign operations.
While Top Glove has increased its selling price to mitigate the impact of the weakened dollar, the benefit of the revised price will only be felt from November onwards, said Lim.
In terms of sales, Top Glove saw especially strong growth from the US where sales volume soared 120 per cent quarter on quarter, driven by a high number of foreign manufacturers’ gloves being placed on the US Food and Drug Administration’s import alert list.
Moreover, the company anticipates greater sales volume growth in the coming quarters as US tariffs on China-made medical gloves are set to kick in.
On Sep 13, the United States Trade Representative decided it would raise tariffs for China-made medical and surgical gloves to 50 per cent by 2025 and 100 per cent by 2026 for its final tariff revision.
Lim said that the tariffs on China will have a positive effect on Top Glove’s sales in Q1. This will be more strongly felt in Q2 when sales of medical gloves from China to the US completely stops.
Ng Yong Lin, executive director of Top Glove, added that the glovemaker had the capacity to meet higher demand from the US. Its running factories have a total capacity of around 60 billion pieces per annum, of which 60 per cent is currently utilised. He said Top Glove can take in up to 20 times its current order of US medical glove shipments, as it still has a lot of factories that are not running.
No dividends were proposed by the board of directors for the quarter under review. Net dividends per share were last recorded as 1.20 sen for 2022.
This brings full-year revenue to RM2.5 billion, up by around 11 per cent from FY2023’s RM2.3 billion revenue.
Full-year losses fell 93 per cent to RM62 million, compared with RM925 million for FY2023.
Bonus issue of warrants
Top Glove also announced that it is proposing a bonus issue of up to 405,964,951 warrants on the basis of one warrant for every 20 existing ordinary shares. Through the proposed bonus issue of warrants, the glove manufacturer said it aims to reward shareholders by enabling them to own warrants which are tradable on Bursa Securities without incurring any cost.
It also said it aims to give shareholders the opportunity to further increase their equity participation in the company through the exercise of the warrants at a pre-determined price. This will also strengthen Top Glove’s capital base by increasing the size of its shareholders’ funds pursuant to the exercise of the warrants while enabling it to raise additional funds for its working capital requirements and capital expenditure.
The warrants will be issued at no cost to entitled shareholders and the exercise price will be determined by the board at a later date.
For illustrative purposes, assuming the exercise price of the warrants is set at RM1.09 per warrant – a premium of 19.4 per cent to the volume weighted average market price of Top Glove shares for the last five trading days – the company could rake in gross profits of up to RM442.5 million from the exercise of the warrants.
Some RM300 million of the profits will fund the construction of new glove factories and the refurbishment of existing factories, while the remainder will be used for working capital requirements.
Optimism over future growth
Moving forward, the company expects sales to improve amid recovery of the glove industry but maintains a “cautiously optimistic approach” for capacity expansion plans, given that the business environment is volatile and may potentially be affected by geopolitical factors.
Lim noted that the company is currently on the “final leg” of its recovery. He said that the “stage is set for an inevitable return to black” in FY2025 in view of the continued increase in sales volume and factories’ utilisation rate.
Shares of Top Glove were up 1.5 per cent or S$0.005 at S$0.33 on Thursday before a trading halt was called at 12.30 pm, ahead of its earnings announcement. The trading halt was lifted at 2 pm and the counter ended the day down 4.6 per cent or S$0.015 at S$0.31.
