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南洋商报 NYSP wrote a post · Oct 10 01:53

End-season net loss significantly narrowed. Top glove offers a 20-for-1 warrant.

End-season net loss significantly narrowed. Top glove offers a 20-for-1 warrant.
Order inflow continues to rise, Top Glove can turn profitable in the 2025 fiscal year.
(Kuala Lumpur, 10th) Top Glove $TOPGLOV (7113.MY)$ Significant reduction in losses for the 2024 fiscal year, as order inflow continues to rise, the management is bullish that the 2025 fiscal year can achieve profitability.
Top Glove's director and manager Lim Kang Hooi stated during an online performance briefing today that, with the current sales growth momentum, the company believes achieving profitability in the 2025 fiscal year is feasible.
In the latest quarterly performance report, the sales volume increased by 91% year-on-year, with sales in North America soaring by 117% month-on-month, accounting for 17% of the total sales.
However, he mentioned that this is mainly due to reduced inventory leading to restocking, rather than the effects of U.S. tariffs.
Looking back at previous reports, the U.S. significantly raised tariffs on Chinese goods, with the glove tariff rate set to increase to 50% starting in 2025, further rising to 100% in 2026; compared to the previously proposed 25% tariff hike in 2026.
"The sales brought about by tariff effects will partly show in the first quarter of the 2025 fiscal year, that is, partially this November, with more effects showing in the second quarter, as China's sales of (medical gloves) to the U.S. will come to a complete halt then."
Top Glove's executive chairman, Tan Sri Lim Wee Chai, added that this will significantly impact sales for Chinese glove manufacturers, who may try to ship out as much as possible by the year-end, whereas (U.S. tariffs) will benefit glove manufacturers from other countries.
When asked if he is concerned about competitors aggressively targeting other regions, Lim Wee Chai believes that, of course, this situation may arise, with competitors possibly actively selling at lower prices in other regions, but profitability still needs to be protected in order to survive.
He pointed out that some glove manufacturers are planning to relocate or expand to Southeast Asia, but this poses challenges for them as operating costs in different regions or countries could increase by 5% to 10%.
Production capacity is sufficient to meet the demands of the U.S. market.
In addition, Chief Operating Officer Huang Yongren revealed that the current annual production capacity of top gloves is 60 billion, with an actual utilization rate of around 60%.
"The main orders from the USA are medical gloves. I believe that with the production capacity of top gloves, we have the ability to handle orders from the USA that are 10 times, 15 times, or 30 times the current level, because compared to other companies, we still have many factories that are not yet operational."
He added that in terms of workforce, they will continue to hire locals and adjust between factories to accommodate the deployment of additional production lines.
He mentioned that the company is still proceeding according to plan, maintaining the target of increasing production by 10 billion units in the next 12 months, but will carefully monitor market dynamics.
He pointed out that the refurbishment cost is approximately between 8 million and 10 million ringgit per quarter, mainly used for repurchasing some spare parts, as well as for repairs and maintenance.
However, Lim Guan Yuan believes that the impact of refurbishment costs will gradually decrease, as profits will be seen in the next quarter.
The weakening of the US dollar raises prices
The depreciation of the US dollar at the end of the quarter has affected the profitability of top gloves. In response to this, Lim Guan Yuan stated that the company has taken some forward hedges on certain positions denominated in USD and adjusted selling prices.
Lin Weicai also added that for the USA market, they recently raised the price by 1 to 2 US dollars per thousand, and it is expected that the price will further increase after the tariff takes effect.
"Currently, our selling price is approximately between 20 and 21 US dollars per thousand. Before the epidemic, it was around 22 or 23 US dollars per thousand."
Finally, he also added that the fluctuation of the Ringgit against the US dollar is due to external factors. The company can only control internal factors to ensure doing their own job well, focusing on quality, cost efficiency, and employees.
Narrowing of the loss in the last quarter
Due to the increase in sales volume, Top Glove's net loss in the fourth quarter of the 2024 financial year significantly narrowed, decreasing from a net loss of 462 million Ringgit in the same period of the previous financial year to a net loss of 3.57 million Ringgit.
However, despite a return to profitability of 50.67 million ringgit in the third quarter, the performance in the final quarter still remained positive.
The company reported to the Malaysian Exchange today that the fourth-quarter revenue as of the end of September reached 835 million Ringgit, a significant year-on-year increase of 75.5%.
According to the announcement, the performance has improved slightly, mainly due to the continuous inflow of orders, keeping sales on the rise, coupled with operational efficiency improvements and contributions from land disposals.
At the same time, the full-year net loss also significantly narrowed to 61.81 million ringgit, compared to a net loss of 0.925 billion ringgit in the previous period; revenue increased by 11.46% year-on-year, to 2.5 billion 15.97 million 9000 ringgit.
20 shares for 1 warrant
In addition, top glove also announced today the distribution of free warrants in a 20-for-1 ratio, with a maximum issuance of 0.4 billion5.96 million4951 warrants.
According to today's announcement, if calculated based on the reference conversion price of 1.09 ringgit per share, the company going long can raise 0.4 billion 42.5 million ringgit, for the construction of a new factory and refurbishment of existing facilities, and operational capital requirements.
If all warrants are ultimately converted into mother shares, the company's total number of shares will increase to 8.5 billion 25.26 million 4000 shares.
The company expects the warrant distribution plan to be completed in the first quarter of next year.
At the close of the market, Top Glove was priced at 1.03 ringgit, down 2 cents or 1.9%, with a trading volume of 64.19 million 1500 shares.
Source of information: Nanyang Business Daily
Disclaimer: This content is for reference and educational purposes only, and does not constitute any specific investment, investment strategy, or recommendation. Readers should bear any risks and responsibilities resulting from relying on this content. Before making any investment decisions, be sure to conduct your own independent research and evaluation, and consult professional advice when necessary. The author and related participants are not responsible for any losses or damages caused by the use or reliance on the information contained in this article.
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南洋商报 NYSP
Nanyang Siang Pau Official Account
《南洋商报》创立于1923年，是马来西亚历史最悠久的中文报纸之一。以财经及商业新闻为主，是商家与投资者必备的新闻资讯平台。
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