Top Glove: Back to 100% capacity in two to three weeks’ time

PETALING JAYA: Top Glove Corp Bhd expects its capacity to bounce back to 100% in two to three weeks’ time from a 50% capacity guidance communicated previously, according to its founder and executive chairman, Tan Sri Dr Lim Wee Chai.

Seven of the group’s 28 factories in Klang that have been affected by one of Malaysia’s biggest Covid-19 outbreaks, the Teratai Cluster, have resumed operations since Tuesday, in Stage 1.

“By the weekend, we hope to go on to Stage 2, which will see an additional seven factories and the following week it will enter Stage 3 with seven more factories and so on,” Lim told the media at a Top Glove first-quarter FY21 (Q1’21) results virtual briefing today.

The 28 factories in Klang are in the midst of a four-week closure spanning November and December, which translates to a 4% impact on its revenue for the full year, with 2% being reflected within its first quarter and the other half will be reflected in the second quarter.

In the second quarter, the group’s managing director, Lee Kim Meow expects a 30% rise in average selling price (ASP) for its normal contract, compared to the first quarter.

“Demand is still very strong and monthly the ASP continues to trend forward despite slightly higher raw material and operating cost, as the price increase is more than enough to cover the rise in cost,” he said.

However, the group has reported that its sales quantity to the US has fallen by 2% year on year in Q1’21, attributed to the decision by US Customs and Border Protection to place a withhold release order status on the glove maker.

With regard to this issue, Lee believes Top Glove is at the final leg of the enquiries posed by the US agency.

“In fact yesterday (Tuesday), we answered all their questions,” said Lee.

“We foresee that we are closer to the tail-end and looking forward for CBP to see us as a company that is serious and really wants to do good, invest and move strongly as evidenced by the actions we have taken over the years.”

The glove maker said it is also fortunate that its customers have been patient and waiting for it to resolve the issue with the CBP.

The managing director believes that things will return to normal once the issue is resolved,

For 2021, Top Glove’s founder is upbeat over its prospects despite a mass rollout of vaccine in the foreseeable future.

Lim pointed out that the group’s order book extends to one year on average and its capacity for next year is fully booked.

“Even if you have a vaccine, you still need gloves. To vaccinate 7 billion people you need 7 billion pairs of gloves and if it requires two dosages this will translate to 14 billion gloves.” said Lim.

He believes that a vaccine would not dampen the demand for gloves; on the contrary, it will increase the usage of gloves.

When asked about Top Glove’s share buyback which has exceeded RM1 billion, the executive chairman said the valuation of the shares is very good.

The group said it has bought back around 2% of its shares and the question of a mandatory general offer will not arise, as the chairman’s share purchases over the past six months are way below the threshold and thus will not trigger such action.