KUALA LUMPUR: TOP GLOVE CORPORATION BHD  net profit for the third quarter ended May 31, 2011 fell 60.3% to RM25.60 million from RM64.48 million a year earlier due mainly to higher latex price and weakening US dollar.
Revenue for the quarter dropped 3.7% to RM535.36 million from RM555.85 million in 2010. Earnings per share was 4.14 sen.
The glove maker declared a first single tier net interim dividend of 5 sen, payable on July 21, 2011.
For the nine months ended May 31, Top Glove’s net profit fell to RM87.06 million from RM200.22 million a year earlier, while revenue was also lower at RM1.51 billion compared to RM1.54 billion in 2010.
In a statement Friday, June 17, Top Glove chairman Tan Sri Lim Wee Chai said the result for 3Q ended May 31, 2010 was an anomaly as the influenza A (H1N1) virus outbreak caused a surge in demand, and latex prices and the US dollar exchange rate were also more favourable then.
He said average latex price had increased by 39% year-on-year in 3Q ended May 31, 2011 while the US dollar had weakened against the ringgit 7.4%.
Lim said the company’s average selling prices (ASPs) were regularly revised to reflect the increase in costs.
However, due to an oversupply situation in the glove industry, it was difficult for Top Glove to pass on the rise in costs to its customers in full, he said.
“Up until now in this fiscal year, we have only been able to pass on around 70% to 80 % of the increase. Furthermore, there is a time lag in the cost pass-through that we have to contend with.
“Latex price has declined about 14% in the past one month from its all-time high of RM10.99 on 11 April 2011 to around RM9.40 in recent weeks. As latex price stabilised, we expect customers who had adhered to minimum inventory holding before, to resume buying,” he said.
Lim said that although business conditions had been challenging, he was confident that the company’s strong balance sheet and cash flow position would allow it to make the necessary investments and improvements to stay competitive and counter the headwinds.
“Besides, Top Glove has been rebalancing its product mix by producing more nitrile gloves to avoid over reliance on natural rubber gloves.
“However since nitrile is also dependent on crude oil, which is depleting and competing with other types of usage, our new production lines have been built to be inter-switchable between producing natural rubber gloves and nitrile gloves,” he said.
Lim said Top Glove’s new factory in Klang, the F21, had 16 lines dedicated to produce nitrile gloves and was already up and running.
Two additional new factories, F22 and F23, which are slated to be completed by October 2011 and March 2012 respectively, will also be installed with nitrile glove production lines, he said, adding that the expansion would increase Top Glove’s capacity from 35.25 billion pieces per annum to 41.55 billion pieces.
Lim said the company has also been investing more heavily in R&D in order to continue innovating new products, to further enhance its product quality and to improve productivity and cost efficiency.
“Top Glove believed the glove industry still remains resilient, for gloves are a necessity especially in the medical and healthcare industry.
“The increased awareness of healthcare and hygiene in developing countries also helps sustain the demand for rubber gloves,” he said.
Written by Surin Murugiah of theedgemalaysia.com