6 Top Highlights From Top Glove Corporation Berhad’s Latest Earnings

Top Glove Corporation Berhad (KLSE: TOPGLOV) (SGX:BVA) recently reported its financial results for the third quarter ended 31 May 2021 (3Q FY2021).  

The world’s largest rubber glove maker saw its sales revenue surge to RM4.16 billion, an increase of 147% compared with the corresponding period in the previous year, while profit after tax came in at RM2.06 billion, 490% higher than 3Q FY2020.

Here are 6 other interesting facts about the group’s latest earnings that investors should know about.

1. Glove demand remains resilient

On a 9-months basis, the group’s performance was robust, with sales revenue of RM14.29 billion, up 246% versus 9MFY2020. Profit after tax was also healthy at RM7.35 billion, surging 11.7 times year on year (YoY).    

The group attributed the strong sales to continued demand for gloves globally amid the ongoing Covid-19 pandemic, which contributed towards the higher profit after tax YoY. 

(Source: 3QFY2021 financial results)

2. Average selling prices (ASPs) peaked in February 2021 

Notwithstanding the above, Top Glove’s financial performance was actually weaker quarter on quarter (QoQ). For the quarter ended 3QFY2021, the group’s sales revenue was RM4.16 billion, 22% lower compared to 2QFY2021, whilst profit after tax was 29% lower at RM2.06 billion. The group’s softer QoQ performance for 3QFY2021 came on the back of adjustments in line with glove market pricing trends, to ASPs which had peaked in February 2021. 

Glove sales volume (quantity sold) also eased 4% QoQ mainly due to reduction in sales to the U.S. following a temporary halt in shipments to the U.S. from Malaysia, in compliance with requirements for the U.S. Customs and Border Protection (CBP). 

(Source: 3QFY2021 financial results)

3. Progress on U.S. CBP Withholding Release Order (WRO) 

To recap, on March 29, U.S. CBP had directed personnel at all US port of entry to begin seizing disposable gloves produced in Malaysia by Top Glove.

U.S. CBP issued a forced labour finding based on evidence of multiple forced labour indicators in Top Glove’s production process, including debt bondage, excessive overtime, abusive working and living conditions, and retention of identity documents. 

Subsequently in April, Top Glove reaffirmed that independent UK consultant Impactt Ltd had verified that the group has resolved all 11 International Labour Organization (ILO) indicators of forced labour. It also stated that the U.S. CBP is currently reviewing its submission over its clarification on the resolution of the 11 ILO indicators, and remain hopeful that the WRO will be lifted.

4. Raw materials price trend 

On average, raw material cost comprised 53% of the cost of product for the 9MFY2021. 

Raw material prices for the quarter ended 3QFY2021 rose from 2QFY2021, with average natural latex concentrate price up by 8% from RM5.85/kg to RM6.31/kg, whilst nitrile latex prices increased marginally by 0.4% from USD2.30/kg to USD2.31/kg. 

Nevertheless, Top Glove expects raw material prices to be on a downtrend going forward, which will augur well for the group.

(Source: 3QFY2021 financial results)

5. 3rd interim single-tier dividend of 18.00 sen

Towards rewarding its approximately 127,000 public shareholders, Top Glove has announced a third interim dividend of 18.00 sen per share, comprising a single-tier third interim dividend of 12.70 sen per share and a special single tier third interim dividend of 5.30 sen per share. The ex-date for the dividend is 23 June 2021, while the payment date is 7 July 2021.

The total dividend declared for 9MFY2021 of 59.7 sen per share, represents a 406% increase from the full-year dividend for FY2020 of 11.8 sen per share. 

6. Strong balance sheet and high cash generation

Top Glove’s highly cash generative operations meant that net cash flow from operating activities surged to RM8.32 billion for the 9MFY2021. By comparison, net cash flow from operating activities was RM1.20 billion for the 9MFY2020. 

As a result, its net cash position as of 31 May 2021 swelled to RM4.23 billion. The group has shared that it has earmarked half of its net cash (i.e. RM2.00 billion) each for capital expenditure and quarterly dividend payments. 

Immediate prospects and targets

Top Glove will continue to work toward meeting the growing global glove demand, which is estimated to grow from a pre-pandemic level of about 10% per annum to about 15% per annum post-pandemic. 

Towards this, the group’s strategy will include a combination of organic expansion, inorganic expansion and strategic investments. 

By 31 December 2024, Top Glove projects to have a total of 60 factories comprising 47 glove factories and 13 other factories, 1,512 glove production lines and a glove production capacity of 205 billion gloves per annum. 

The group’s organic expansion plans for 2021 to 2024 are detailed below:

(Source: 3QFY2021 financial results)

Add a Comment

Your email address will not be published. Required fields are marked *