KUALA LUMPUR: Top Glove Corporation Bhd expects better earnings in its current year ending 2020 (FY20) backed by the recent rise in ad hoc and spot orders by government agencies and global market demand.
The world's largest gloves manufacturer said it sales would likely double in its current fourth quarter, driven by higher average selling prices (ASP).
Top Glove executive chairman Lim Wee Chai said the company expects a 10 to 15 per cent increase in ASP, given the further squeeze in demand-supply for gloves.
It is now guiding for a monthly double-digit ASP increase at least for the next few months.
Lim said Top Glove envisions "extremely" robust quarters ahead, driven by strong demand growth, high utilisation and additional capacity coming onstream.
"We expect the increase in raw material prices, estimated from 10 to 13 per cent. However, we correspondingly raised selling prices to pass on the higher cost.
"As such, we are assuming that margins will stable and recover in the subsequent quarters," Lim told reporters via webinar during Top Glove's third quarter financial year results briefing.
With a year's worth of orders in the pipeline, Top Glove is confident of delivering solid results not only for the FY20, but for financial year 2021.
Top Glove recorded its best-ever quarterly net profit of RM347.9 million for the third quarter (Q3) ended May 31, 2020 which was more than fourfold from RM74.67 million a year ago.
Previously, the company had registered the highest quarterly net profit of RM128.35 million in first quarter of financial year 2016.
However, it said this quarter's net profit had already made up 94 per cent net profit for the full financial year ended August 30, 2019 of RM370.56 million.
It attributed the strong performance to the growth in sales volume, on the back of the global Covid-19 pandemic.
The group's revenue rose 41.85 per cent in Q3 to RM1.69 billion compared to RM1.19 billion in the previous corresponding quarter (also the strongest ever quarterly topline).
Meanwhile, its monthly sales orders went up by some 180 per cent.
This resulted in long lead times, which went up from 40 days to around 400 days, whereby orders placed now would only be delivered over a year later.
For the nine-month period, its net profit nearly doubled (97.93 per cent) to RM575 million, from RM290.51 million last year, while revenue surged 14.26 per cent to RM4.13 billion, from RM3.61 billion.
Following the increase in glove demand from virtually every country in the world, the group's utilisation rate rose from a pre-Covid level of 85 per cent to above 95 per cent in Q3.
The group declared an interim dividend of 10 sen per share in respect of FY20, payable on July 9.
As at May 31, Top Glove's financial position improved significantly, with a net cash position of RM279 million compared with net borrowings in Q2 2020.
This has enabled the group to fund capital expenditure (capex) requirements.
"To this end, Top Glove has earmarked RM3 billion for capex to build 450 new lines, creating new capacity of 60 billion pieces of gloves from 2020 to 2026," it said.
Top Glove said it would continue to expand its capacity to ensure it is well-positioned to fulfil global glove demand, which is expected to grow to 12-15 per cent per annum post-Covid-19 from a pre-Covid 19 level of 8-10 per cent per annum.
This woukd be backed by increased usage in both the medical and non-medical sectors, as well as heightened hygiene awareness.