Top Glove 2Q net profit falls 63% to RM25.41m

Written by Surin Murugiah of theedgemalaysia.com  
Wednesday, 16 March 2011 13:45

KUALA LUMPUR: TOP GLOVE CORPORATION BHD [] net profit for the second quarter ended Feb 28, 2011 fell 63.9% to RM25.41 million from RM70.53 million a year earlier, due mainly to persistently high latex prices and the continued weakening of the US dollar coupled with the time lag in passing on the higher costs to its customers,

Revenue for the period fell to RM485.21 million from RM509.89 million last year. Earnings per share was 4.11 sen while net assets per share was RM1.82.

For the six months ended Feb 28, Top Glove’s net profit tumbled to RM61.46 million from RM135.73 million last year, on the back of revenue RM976.72 million.

Reviewing its performance, Top Glove said the decline in performance comparing with last year was also due to the exceptionally high sales volume experienced last year during the H1N1 flu virus outbreak.

It said on Wednesday, March 16 that in order to mitigate latex cost increases in the future, the company had started moving upstream by acquiring land by diversifying into rubber PLANTATION [].

“Top Glove is also dedicating more production lines to produce nitrile gloves, which command better margins and not subjected to the volatility in latex prices,” it said.

The company said it continued to maintain its strong balance sheet position with net cash and short term investments of RM207 million despite higher working capital requirement from the escalating latex price.

Top Glove chairman Tan Sri Lim Wee Chai said it was a challenging period, as the company faced substantial increases in its main raw material costs and adverse foreign exchange movements.

“Nevertheless, we have started to revise our latex glove prices and it is starting to arrest the decline in our revenue. We are also rigorously mitigating the impact of foreign exchange through hedging with forward contracts,” he said.

Lim said Top Glove's long-standing business relationship with its customers had enabled it to seek their understanding in passing on part of the increased raw material costs to them.

“Even though in the short term we expect the business conditions to remain difficult, I am  encouraged by our prospects going forward while we take actions to strengthen the Group and improve returns to shareholders,” said Lim.