For its second quarter ended Feb 28, 2023 (Q2 FY2023), the group posted a net loss of RM164.7 million from a net profit of RM87.55 million a year ago, translating to a loss per share of 2.1 sen.
This brings the total net loss for the first half of the year to RM332 million. Its revenue also fell 58.19% to RM618.01 million from RM1.48 billion a year ago.
However, it narrowed the loss from the preceding quarter ended Nov 30, 2022 (Q1 FY2023) of RM168 million. This was wider than the RM52 million net loss posted in Q4 FY2022.
“The group’s financial performance continued to be impacted by headwinds which have weighed heavily on the glove industry,” it said in its filing with Bursa Malaysia today.
“Destocking activity persisted, driven by excess customer inventory, resulting in a softer order book,” it added.
Hit by the ‘perfect storm’
MD Lim Cheong Guan lamented the group had been hit by the “perfect storm” and that the glove industry has been experiencing an extremely challenging past one year.
“Owing to the perfect storm of rebalancing demand and supply, coupled with softer average selling prices (ASPs) and cost increases, the financial results delivered will not be representative of the company’s or industry’s actual potential.
“However, this is a temporary phase we will have to weather after two years of elevated pandemic driven glove demand.”
Lim added the “challenging and competitive business landscape is expected to endure through 2023”.
To mitigate effects of the headwinds encountered, he said the group will continue to implement efficiency enhancement and cash conservation initiatives aimed at driving recovery and improving its bottom line, while increasing ASPs to offset rising costs.
“We believe it will be a matter of time before our results are more reflective of the glove industry’s potential.
“In the meantime, we continue to be committed to ensuring the well-being of both our people and our business, while delivering value to our stakeholders,” he concluded.
At the close of trade, Top Glove’s share price had rallied 19.29% to 83 sen, giving it a market capitalisation of RM6.65 billion.
Glory days behind
Whilst the pandemic forced many industries to hit the brakes, the surge in global demand for gloves led to a skyrocketing in Top Glove’s share price in 2020.
At the start of the year (Jan 2, 2020), Top Glove’s share price was a humble RM1.54. The counter would hit RM9.60 on July 20, 2020 – a 523% surge in value in just seven months.
Its net profit in the quarter ended May 2020 leaped 366% year-over-year to RM347.9 million — almost equal to the previous full-year profit of RM367.5 million.
The maker of one out of every four gloves in the world said in September 2020 it expected “fresh highs” after its quarterly profit surged more than 1,500%. Almost three years on, it is a penny stock languishing at around the 70-80 sen level.
Vaccine rollout from June 2021 onwards also saw more glove makers enter the market, and eventually flooding the market and tanking the ASPs for gloves.
Six months into 2022, the numbers were beginning to paint a very different story.
Top Glove saw net profit plunge 99% to RM29 million for the quarter ended May 31, 2022, down from some RM2 billion in 2021.
Nevertheless, the group is optimistic of better times ahead. “There is a slight improvement in the bottom line. We will strive to work harder and smarter to improve better results. All is not lost: there is a flicker of light at end of tunnel,” said Lim at a virtual media briefing today.
Executive chairman Lim Wee Chai concurred. “Next financial year, we hope to be profitable. We’ve made profit for 32 years and (may make) a loss for one, that’s not so bad,” he said at the same briefing.