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KUALA LUMPUR (September 17): Top Glove Corp Bhd has guided that the average sale price (ASP) of its nitrile gloves will increase 30% in October, 15% in November and perhaps another 10% after November, according to the perspectives of the group. and the glove industry remains promising.
As of this month, the group’s ASP for nitrile gloves amounts to US $ 70 per 1,000 pieces. Nitrile glove production accounted for almost 60% of the group’s total production, while the remainder comprised latex and vinyl gloves.
Top Glove Chairman Tan Sri Lim Wee Chai further indicated that the increase in glove ASP due to virus-driven surge in demand should last for at least another year, due to shortages of raw materials, particularly for nitrile gloves.
The group’s ASP for nitrile gloves in its fourth quarter ended August 31, 2020 (4QFY20) has more than doubled (103%) since 3TFY20, while in year-on-year terms, it has increased by 114%. Nitrile glove ASP for fiscal 2020 as a whole increased 31% over fiscal 2019.
Lim said demand for gloves is estimated to grow 20% annually in 2020, 25% in 2021 and 15% in 2022, compared to the 10% annual growth seen before the pandemic outbreak.
The group also echoed what its peer Hartalega Holdings Bhd previously said, that the increase in global demand, which is anticipated to be 200 billion pieces by 2022, will exceed the new estimated supply coming from major manufacturers of Malaysia. Read: Glove supply will not meet demand in next three years, says Hartalega president
“If you want to build a nitrile latex raw material factory, it may take two to three years. Building a glove factory can take one to two years. Therefore, it means that the supply will not be able to increase as quickly to meet the demand, ”explained Lim.
And despite news of several promising vaccines in the works, Top Glove expects demand for gloves to remain strong as vaccines take time to produce.
M&A is not likely but not impossible
Lim, meanwhile, said it makes more sense for the world’s largest rubber glove maker to grow its business now organically, rather than through mergers and acquisitions (M&A), as the latter tend to be more expensive. , given that the industry is now doing well.
“For mergers and acquisitions (M&A) during good times, the selling price of a glove company or factory will be high. So the possibilities of mergers and acquisitions are not so likely … Investors do not like to pay very high prices to acquire a glove company, since we can build our own at a much lower cost and with newer machines ” Lim told a virtual press conference held in conjunction with the announcement of the group’s latest quarterly and annual results.
Having said that, Lim said the group does not rule out the possibility of engaging in M&A activities, given its strong balance sheet, with net cash of RM2.34 billion as of Aug. 31.
“There is always a chance … less chance (of something happening) does not mean there is no chance … So we have to defend some money for acquisitions,” he added.
The group has also allocated RM8 billion over the next six years, from fiscal year 21 to fiscal year 26, to increase its annual glove production capacity by 100 billion pieces, up from 85.5 billion pieces. current per year.
Read also:
Top Glove posts RM1.29b net profit in Q4, strongest set of results ever
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