KUALA LUMPUR: Top Glove Corp Bhd expects average glove prices to rise 30 per cent in its current second quarter ending February 28 2020 as it ramps up output by 10 per cent.
The production hike was in line with Top Glove's strategy of switching from natural latex gloves to produce more nitrile gloves, executive director Lim Cheong Guan said.
Lim said the strategy, in turn, was part of the group's ongoing expansion to overcome the shortage in nitrile raw materials due to strong market and better margins prospect.
"This will contribute to a higher profit in the financial year ending August 31, 2021 (FY21). We expect the average selling price (ASP) in Q2 will be higher by around 30 per cent compared to the first quarter (Q1) ended November 30, 2021," he said at a virtual press conference on Top Glove's first quarter (Q1) 2020 results today.
The company's net profit surged more than 21-fold to RM2.4 billion in the quarter ended November 30, 2020, from RM111.43 million a year ago.
The company attributed this to higher sales output, high utilisation levels which amplified production efficiency, as well as higher ASP.
Group revenue surged 293 per cent year-on-year to RM4.76 billion from RM1.21 billion previously.
Top Glove said the uptrend in raw material prices had continued, as natural latex concentrate increased 18 per cent to an average of RM5.14 per kilogramme (kg) and nitrile latex up 24 per cent to an average of US$1.31 per kg quarter-on-quarter.
Lim said demand for Top Glove's products remained strong and monthly ASP continued to trend forward, despite slightly higher raw material and operating cost.
"The ASP is more than enough to cover these cost increases. Demand is expected to grow at 25 per cent in 2021, 15 per cent in 2022 and 2023, respectively.
"Total demand will grow from 360 billion pieces of gloves in 2020 to 596 billion in 2023," he said, adding that the group foresees there would still be a shortage of gloves for the next three years.
He said the potential increase in demand was mainly due to the current low stockpile of gloves, especially in the United States where the stockpile had dropped from 16.9 billion pieces in December 2019 to 2.0 billion pieces in October.
Lim said some new expansions from new glove players might be delayed due to lack of contractors to install the production line, shortage of nitrile raw material, and constrain of manpower, if dependent on foreign workers.
Meanwhile, Top Glove expects to fully resume operations of its plants in Meru, Klang in two to three weeks after temporarily halting its 20 production lines in late November to curb the spread of Covid-19 among its workers.
Executive chairman Tan Sri Dr. Lim Wee Chai said the Meru facilities had resumed its operations in stages yesterday (Tuesday) involving the resumption of seven factories.
"Hopefully by this weekend, we can start Stage Two by opening another seven factories. Next week, we can have another seven factories (Stage Three) and the following week another seven factories (Stage Four)."
Lim said the impact from the four-week closure of its Klang facilities would be reflected in the group's balance sheet with an overall impact of about 4.0 per cent.
As at December 8, a total of 8,868 factory workers had been tested at its facilities in Meru.
Of the total, 5,147 workers were tested positive (58 per cent), while the remaining 3,721 workers (42 per cent) were tested negative.
"So far, over 5,000 workers have discharged from hospital and their health conditions are stable and healthy as well as fit to work," he added.