$Top Glove (BVA.SG)$ Top Glove is confident it has sufficien...

Top Glove is confident it has sufficient capacity to meet the anticipated surge in US demand for medical gloves following the imposition of higher tariffs on Chinese imports, which are set to take full effect in Jan 2025.

Top Glove is currently operating at around 60% of its total production capacity, which stands at 60 billion gloves per annum, said executive director Ng Yong Lin during the company's results briefing on Thu.

Ng said Top Glove is "well-positioned" to ramp up production to meet an expected 10 to 20 times increase in its current US shipment volumes, particularly for medical gloves.

The higher tariffs, announced in Sep 2024 by the US Trade Representative, will see import duties on Chinese-made medical gloves rise to 50% in 2025 and further to 100% by 2026, a significant jump from the current 7.5% tariff.

This is expected to drive growth of both volume and average selling price for Malaysian glove manufacturers as the price gap between Chinese and Malaysian gloves narrows, according to research reports.

In the fourth quarter ended Aug 31, 2024 (4QFY2024), Top Glove recorded a 91% year-on-year increase in sales volume and expects this positive trend to continue as demand from the US grows due to the supply gap created by the higher tariffs on Chinese gloves.

"To ensure the group is well positioned to meet the rapidly returning glove demand, installation of advanced production lines, which had been temporarily halted due to oversupply, will resume at Top Glove's newer factories," the group said in a statement during the releases of its 4QFY2024 earnings.

Top Glove currently operates 47 factories, including 41 in Malaysia, five in Thailand, and one in Vietnam, with a total glove production capacity of 95 billion pieces per annum.

The group is also currently in the midst of completing the installation of production lines at its two new facilities which are pending due to temporary production oversupply. Upon operation, the new factories will add an additional six billion pieces of glove production capacity.