PETALING JAYA: Top Glove Corp Bhd foresees that a return to the black is unlikely to occur for the next quarter of its financial year 2023 (FY23), despite better outlook projections for average selling prices (ASP) of its glove products, improved demand and declining natural gas prices.
Managing director Lim Cheong Guan explained that due to the challenging position and market it is in, the group will “unlikely” to be back in the black for its final quarter in FY23. However, it will aim to turn earnings before interest, taxes, depreciation, and amortisation (EBITDA) positive.
In this situation, he said the emphasis will be on cash flow, while EBITDA positive means to increase the utilisation rate in the second half of the year to about 50%.
“Hopefully, the price (of rubber gloves can increase by) around 3% to 5% range, so we can at least have EBITDA break even, then the next step we can look into returning to black,” he said during webinar briefing on its performance in the third quarter ended May 31, 2023 (Q3’23) recently.
For Q3’23, Lim said sales volume decreased by 21% and ASP rose by 6%, driven by the increased ASP which impacted sales volume and utilisation, price competition between glove players as well as customers placing smaller orders due to short delivery time.
In terms of costs, he said the natural rubber latex concentrate price increased by 2% quarter on quarter (q-o-q), while nitrile latex price also rose by 7% q-o-q.
In terms of energy costs, the natural gas tariff declined by 16% from April 2023 and is expected to reduce further by 11% from July 2023. Furthermore, the appreciation of US dollar and its ongoing cost optimisation initiatives help mitigate higher costs.
Lim noted that the ASP of its gloves have bottomed out since the second quarter of FY’23 and are on an upward trend, with revision expected to persist.
In terms of demand outlook, he anticipates that replenishment activity is expected to commence as customer glove inventory is close to depletion, which could spur an uptick in glove demand in the second half of the year.
“The good thing is that glove consumption has also gone up post-pandemic, on the back of elevated hygiene and health awareness. With that...utilisation is expected to improve as demand increases,“ he said.
The group had employed measures which include decommissioning obsolete production lines and temporarily stopping production at 17 out of its 49 factories, in light of the softer global glove demand which the glove industry continues to contend with.
The decommissioning of production lines eases its production capacity by five billion pieces of gloves, bringing its total production capacity to 95 billion pieces of gloves. In addition, the group implemented a manpower restructuring exercise.
The glove marker registered a net loss of RM130.59 million for Q3’23 compared with a net profit of RM15.29 million in the corresponding quarter last year. Revenue decreased to RM530.62 million from RM1.49 billion for the same quarter last year.
Source: The Sun Daily
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