$Top Glove (BVA.SG)$ Top Glove said it expects the price of ...

Top Glove said it expects the price of its raw materials to soften for the rest of the year, leading to a further improvement in its profit margin.

The group also expects to see an increase in glove demand in the coming quarters as the US may switch from China to Malaysia for its imports.

Although raw material costs escalated in its third financial quarter ended May 31, 2024 (3QFY2024), Top Glove managing director Lim Cheong Guan said the group has managed to improve its profitability margin, mainly due to its ability to command selling price, utilising its cost pass-through mechanism.

Top Glove's margin improved from -7% for FY2023 to 11% for the first nine months of FY2024.

Raw materials accounted for 41% of Top Glove's production cost structure in 3QFY2024.

Lim said that the group has also reopened temporarily closed factories and one new factory is to commence operations, increasing running capacity by an additional three billion pieces.

"The high utilisation rate will improve the production cost efficiency and improve our margin going forward," he said.

"Even though the tariff by the US on medical gloves from China will only commence in 2026, we believe the US customers will start outsourcing to Malaysian glove manufacturers before the tariff comes into force," he added.

The move has been widely seen to be beneficial for Malaysian glove makers.

As demand for Malaysian gloves pick up, Lim said Top Glove will be in an even better position to command on the selling price of its gloves, further improving its margin.