Top Glove posts record revenue and earnings for FY20, plans RM8b capex for FY21-26

PETALING JAYA: Top Glove Corp Bhd posted a record financial performance for its financial year ended Aug 31, 2020 (FY20) and has earmarked RM8 billion for capital expenditure (capex) from FY21 to FY26.

The RM8 billion capex will provide Top Glove with additional capacity of 100 billion pieces of gloves over the next six years. It will be invested in new capacity, enhancement of existing manufacturing facilities, a gamma sterilisation plant, landbank for future expansion, Industry 4.0 digitalisation and improvements to its workers’ facilities.

“We plan to invest RM1.9 billion in capex for FY2021 for building new factories, new glove machines, buy land … through organic growth,” Top Glove executive chairman Tan Sri Lim Wee Chai said in a briefing webinar after announcing its FY20 results today.

Factory F41 which is the group’s first factory in Vietnam, is expected to come onstream next month, with an initial production capacity of 2.4 billion pieces of gloves from its 10 production lines.

Top Glove’s net profit for the fourth quarter ended Aug 31, 2020 soared more than 17-fold to RM1.29 billion from RM74.17 million a year ago on the global upsurge in glove demand arising from the Covid-19 pandemic. Its revenue more than doubled to RM3.11 billion from RM1.19 billion in the corresponding period in the last financial year.

Demand growth in Q4’20 was especially strong in Asia, Western Europe and Eastern Europe, rising by 110%, 73% and 64% respectively, compared with Q4’19. Most robust was demand for nitrile gloves, which grew by 31% year on year, while natural rubber examination gloves also saw growth of 7% versus the corresponding period in FY2019. Reflecting market demand, average selling prices (ASPs) were adjusted upwards.

Raw material prices in Q4’20 were on the uptrend compared with Q3’20, as natural latex concentrate increased 3.9% to an average of RM4.56/kg and nitrile latex rose 3.3% to an average of US$0.94/kg.

For the full year period, its net profit soared by five times to RM1.87 billion from RM364.67 million in FY2019, while revenue surged 51% to its highest-ever RM7.24 billion compared with RM4.8 billion in the previous year’s corresponding period. Sales volume also grew by 17% versus FY2019.

The board recommended a final dividend of 8.5 sen per share, amounting to a payout of RM691.8 million. This brings the total FY20 dividend payout to 11.8 sen per share, amounting to a total payout of RM961.2 million. The total dividend of 11.8 sen represents an increase of 9.3 sen or 373% over FY2019, which is a net profit payout ratio of 51%.

As at Aug 31, 2020, the group was in a net cash position of RM2.34 billion, in turn allowing the funding of ongoing organic capex, dividend payment, future mergers and acquisitions, as well as the acquisition of land bank for business expansion.

The outlook for the company and glove industry remains very promising. With Covid-19, Top Glove estimates that glove demand will grow by 20% a year in 2020, 25% in 2021 and 15% post-Covid.

Executive director Lim Cheong Guan believes that the best is yet to come, with new peaks ahead. With more upside in glove demand expected, the group looks forward to fresh highs in FY21.

“The continuous increase in sales orders from 195 developed and developing countries across the world, coupled with rapid growth in capacity and significant improvements in productivity through technology augurs well for the group’s results going forward. Notwithstanding news of several promising vaccines in the pipeline, glove demand remains at a ‘supernormal’ level, as gloves will still be required even when a vaccine becomes available,” he said.

Cheong Guan pointed out that new entrants will take up to two years to start production, and are not competitive due to their small scale and unable to access to raw materials.

The group’s monthly order book has seen a significant rise of about 150% from pre-Covid days while lead time (delivery) has gone up from about 40 days to as much as about 400 days at present. The exceptionally strong demand coupled with higher ASPs bodes well for the group’s results in the coming quarters. ASP will continue to rise, as nitrile raw material supply faces constraint.

“With a triple digit increase in the group’s monthly order book and lead times closing in on the two-year mark, we expect to continue delivering solid results well into FY2021,” managing director Datuk Lee Kim Meow said.

Top Glove secured its position as the second largest company on Bursa Malaysia and the ninth largest company on Singapore Exchange in terms of market capitalisation, with RM68.6 billion and S$22.6 billion as at Sept 15, 2020.

Also, it remains a member of the MSCI Global Standard Index, FTSE Bursa Malaysia KLCI Index and Dow Jones Sustainability Indices for Emerging Markets.

Wee Chai said the group is planning to be listed on the Hong Kong stock exchange by next year, to expand and diversify its investor base. “We are talking to bankers to see which is the most suitable method to go for listing in Hong Kong.”

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