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World’s Largest Rubber Glove Maker Posts Record Profit

World’s Largest Rubber Glove Maker Posts Record Profit

Top Glove Corp., the world’s largest rubber gloves maker, posted a record first-quarter profit as the coronavirus pandemic continued to drive demand for protective equipment.

Net income jumped to 2.38 billion ringgit ($584 million) in the three months ended November, from 111.4 million ringgit in the year-ago period. Revenue almost quadrupled to 4.76 billion ringgit, according to an exchange filing on Wednesday.

Top Glove and its peers have been one of the hottest pandemic trades of 2020, with their shares scaling to records as they rode on an extraordinary boom in demand for protective gear amid the pandemic. The rollout of Covid-19 vaccines next year won’t hurt demand for medical gloves as people administering the shots will need protection, the company said, as it set aside 10 billion ringgit to expand capacity by 100 billion pieces over five years.

Top Glove also allocated 100 million ringgit for workers’ housing following the spread of infections at its plants last month that prompted the government to order the company to shut 28 of its factories. The outbreak capped Top Glove’s gains this year, with the stock tumbling 17% in November, the biggest monthly drop since January 2016, as the company said some deliveries could be delayed by up to four weeks.

World’s Largest Rubber Glove Maker Posts Record Profit

“In the short run, investors will need to be pay attention to the impact of the closures of factories and potential fines or penalties for living conditions of their workers on the company’s earnings,” said Chua Zhu Lian, investment director at Fortress Capital Asset Management Sdn. in Kuala Lumpur. “Overall, Top Glove should continue benefiting from the higher average selling prices,” he said, adding new entrants into the business will eventually increase supply.

The company proposed an interim dividend of 16.5 sen per share. The stock slid 3.5% to end at 6.84 ringgit as investors including Chua said the record earnings had already been factored into the price. The shares have surged more than 300% this year.

Effective Vaccine

Markets around the world have been given a series of boosts in recent weeks by vaccine news from pharmaceutical firms including Pfizer Inc., Moderna Inc. and AstraZeneca Plc. Top Glove said demand for gloves won’t revert to pre-pandemic level because of rising awareness of hygiene.

“In the weeks to come, a lot of people will be watching the trend and if some of these vaccine don’t prove to be effective, there will be a pullback and scientists will continue to look for the correct vaccine,” Managing Director Lee Kim Meow said at a virtual briefing. “It also takes time to manufacture these vaccines.”

The outsized gains in glove producers’ shares this year have altered the composition of Malaysia’s stock market. Supermax Corp. is set to join rivals Top Glove and Hartalega Holdings Bhd. in the benchmark FTSE Bursa Malaysia Index on Dec. 21. The addition will take the sector’s weighting in the gauge to 13.6% from 11%, according to Smartkarma.

Supermax has rallied more than 1,000% this year, while Hartalega has more than doubled. Meantime, Top Glove is “still working” on its plan to list in Hong Kong, Chairman Lim Wee Chai said the virtual briefing.

Excerpts from the Top Glove statement:

  • Demand for gloves will likely grow 20% in 2020, 25% in 2021 and 15% after the pandemic
  • Net cash position at the end of fiscal 1Q stands at 3.45 billion ringgit
  • Prices of natural latex concentrate rose 13% to an average of 5.14 ringgit per kilogram and nitrile latex jumped 39% to an average of $1.31 per kilogram on-quarter, driven by unfavorable weather conditions and supply constraints.

©2020 Bloomberg L.P.