GLOVE manufacturer Top Glove : BVA -5.36% on Wednesday (Dec 20) posted a net loss of RM57.7 million (S$16.4 million) for the first fiscal quarter ended November, versus a net loss of RM168.2 million in the corresponding year-earlier period.

 

The group attributed the narrower losses to a &ldquo strong improvement in performance&rdquo on a year-on-year basis, as well as a higher sales volume which led to increased utilisation and efficiencies. Its ongoing operational, quality and cost optimisation initiatives also helped to mitigate the increase in raw material prices. 

 

Top Glove said that the industry is progressing towards a recovery from a protracted period of demand-supply imbalance.

 

No dividend was declared for the period under review, unchanged from a year earlier. 

 

Revenue for the quarter under review was down 22 per cent to RM493.5 million from RM632.5 million. On a quarter-on-quarter basis, revenue was up 4 per cent, the company said. 

 

Operating expenses fell 27.9 per cent to RM553 million from RM767.2 million.

 

In a call on Wednesday to discuss the company&rsquo s latest financial results, Top Glove&rsquo s managing director Lim Cheong Guan said it is &ldquo tough&rdquo to predict when the company will return to profitability.

 

However, he estimates that the company should be able to either break even or swing back to the black by the end of FY2024. The company is also looking to resume dividend payouts as per its dividend policy when it turns profitable.

 

&ldquo There is better demand, better utilisation, and... (the company&rsquo s) cost structure is also lighter,&rdquo said Lim.

 

Top Glove, along with other glove manufacturers, has enjoyed a boost in share price with the resurgence of Covid-19.

 

In response to queries on whether the company is expecting a resultant spike in demand, Lim said Top Glove has noticed a growth in demand in Asia, Europe and the US.

 

However, he noted that the rise in demand has mainly been over the past one to two months, and said he would not rush to attribute the increase in orders to the resurgence of Covid cases.

 

At the height of the pandemic, glovemakers in China &ndash both existing companies and new entrants &ndash gave Malaysian incumbents a run for their money.

 

These Chinese glovemakers ramped up production capacities and slashed the cost of their gloves, which swayed customers over and crimped the market share of Malaysian glovemakers.

 

When asked if there was the possibility of another price war taking place between Chinese and Malaysian glovemakers, Lim acknowledged that competition is always present in the glovemaking industry.

 

&ldquo But going forward, we expect (the competition) to be more rational compared to the earlier stage,&rdquo he said.

 

Utilisation rates for Chinese players currently stand at over 90 per cent, but Lim noted that their margins are as low as 1 or 2 per cent.

 

Listed companies, in particular, will not be able to sustain production at such low margins, he said, adding that the recent depreciation of the renminbi could add to the financial pressures of Chinese glovemakers.

 

Top Glove said it has a positive mid to long-term outlook on the glove industry, as gloves are an essential, single-use item in sectors such as healthcare, industrial and food and beverage. Gloves also have no &ldquo viable replacement&rdquo , the company said.