“It has been an extremely challenging year for us and for the industry as well,” Top Glove’s managing director, Lim Cheong Guan, said in an earnings briefing.
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On top of the gloomy market outlook, Malaysia’s glove 欧冠竞猜平台 industry is also grappling with the growing focus on environmental, social and governance issues.
There are also concerns that companies in China, where manufacturing is relatively cheap, will maintain their low prices to keep orders coming in, making it all the more difficult for the industry to pivot to raising prices.
Executive chairman Lim Wee Chai on Tuesday announced a 5% price hike effective in October to soften the blow from higher costs, saying the company “cannot continue to lose money”. But there is not much of a quality difference between Top Glove and its competitors, and the company risks losing market share if it raises prices unilaterally.
Top Glove itself is putting capacity additions on hold until 2023, and slashed the expansion plans it just set out in June.
US Customs and Border Protection has banned imports of gloves from Supermax over concerns about forced labour, and Top Glove was under similar restrictions until last September.
Meanwhile, a widening supply-demand gap dragged down prices. Glove makers, especially in China, ramped up production to meet demand during the pandemic, and have yet to adjust output to reflect the downturn. Top Glove’s average sales prices tumbled 59% from the previous fiscal year’s record high.
The picture looks similar throughout Malaysia’s glove industry, which holds a combined 60%-plus share of the global market. Hartalega and Supermax logged steep declines in sales and profits, and their share prices have plummeted roughly 90% from their peaks in July and August 2020.
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Market leader Top Glove on Tuesday reported a 97% plunge in net profit to RM235.97 million for the fiscal year ended last month, and a RM52.58 million net loss for June through August, its first quarter in the red since its 2001 listing. Its shares touched a roughly seven-year low that day.
The industry is already starting to see a shakeout. Aspen Group, a real estate developer that ventured into glove manufacturing in 2020, said in June it is “significantly scaling down” operations and is considering options including disposing of the entire business.
The main problem for Top Glove was a steady slide in sales, in terms of quantity as well as prices. Sales volume sank 25% last fiscal year as the deluge of orders for medical gloves spurred by the pandemic abated, with declines in nearly every region, including a 43% drop in Asia, its biggest market.
SINGAPORE: Rubber glov 欧冠竞彩官方, e manufacturers in Malaysia have come down hard from their pandemic highs, as the industry struggles to adjust to a drop-off in Covid-19-related demand on top of rising energy costs.
This one-two punch sent the company’s sales down 66% to RM5.5 billion.
Rising production costs further dented profits. Natural gas prices shot up roughly 60% over the course of fiscal 2022 amid Russia’s invasion of Ukraine, on top of minimum wage hikes of up to 36% in May.
More fundamental changes, such as boosting production efficiency and restructuring to leverage economies of scale, will likely be needed. Top Glove has positioned improving efficiency in its manufacturing process through “innovation and automation” as a priority, along with 欧冠竞彩推荐 reskilling workers.
The situation looks unlikely to improve for some time. Brokerage CGS-CIMB estimates that if the current slump continues, global demand will not exceed supply until 2024, even if manufacturers shut down factories.
“The challenging environment will continue to persist for the next few quarters,” Lim said.
-ADVERTISEMENT-
On top of the gloomy market outlook, Malaysia’s glove 欧冠竞猜平台 industry is also grappling with the growing focus on environmental, social and governance issues.
There are also concerns that companies in China, where manufacturing is relatively cheap, will maintain their low prices to keep orders coming in, making it all the more difficult for the industry to pivot to raising prices.
Executive chairman Lim Wee Chai on Tuesday announced a 5% price hike effective in October to soften the blow from higher costs, saying the company “cannot continue to lose money”. But there is not much of a quality difference between Top Glove and its competitors, and the company risks losing market share if it raises prices unilaterally.
Top Glove itself is putting capacity additions on hold until 2023, and slashed the expansion plans it just set out in June.
US Customs and Border Protection has banned imports of gloves from Supermax over concerns about forced labour, and Top Glove was under similar restrictions until last September.
Meanwhile, a widening supply-demand gap dragged down prices. Glove makers, especially in China, ramped up production to meet demand during the pandemic, and have yet to adjust output to reflect the downturn. Top Glove’s average sales prices tumbled 59% from the previous fiscal year’s record high.
The picture looks similar throughout Malaysia’s glove industry, which holds a combined 60%-plus share of the global market. Hartalega and Supermax logged steep declines in sales and profits, and their share prices have plummeted roughly 90% from their peaks in July and August 2020.
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Market leader Top Glove on Tuesday reported a 97% plunge in net profit to RM235.97 million for the fiscal year ended last month, and a RM52.58 million net loss for June through August, its first quarter in the red since its 2001 listing. Its shares touched a roughly seven-year low that day.
The industry is already starting to see a shakeout. Aspen Group, a real estate developer that ventured into glove manufacturing in 2020, said in June it is “significantly scaling down” operations and is considering options including disposing of the entire business.
The main problem for Top Glove was a steady slide in sales, in terms of quantity as well as prices. Sales volume sank 25% last fiscal year as the deluge of orders for medical gloves spurred by the pandemic abated, with declines in nearly every region, including a 43% drop in Asia, its biggest market.
SINGAPORE: Rubber glov 欧冠竞彩官方, e manufacturers in Malaysia have come down hard from their pandemic highs, as the industry struggles to adjust to a drop-off in Covid-19-related demand on top of rising energy costs.
This one-two punch sent the company’s sales down 66% to RM5.5 billion.
Rising production costs further dented profits. Natural gas prices shot up roughly 60% over the course of fiscal 2022 amid Russia’s invasion of Ukraine, on top of minimum wage hikes of up to 36% in May.
More fundamental changes, such as boosting production efficiency and restructuring to leverage economies of scale, will likely be needed. Top Glove has positioned improving efficiency in its manufacturing process through “innovation and automation” as a priority, along with 欧冠竞彩推荐 reskilling workers.
The situation looks unlikely to improve for some time. Brokerage CGS-CIMB estimates that if the current slump continues, global demand will not exceed supply until 2024, even if manufacturers shut down factories.
“The challenging environment will continue to persist for the next few quarters,” Lim said.
