KUALA LUMPUR, June 16 — Top Glove Corp Bhd believes that a return to the black is unlikely to happen in the last quarter of its 2023 financial year (FY2023) despite an improved outlook projected for average selling prices (ASPs) of its gloves and declining lower natural gas prices as well as raw materials.
Managing director Lim Cheong Guan said the focus will now be on turning earnings before interest, taxes, depreciation, and amortisation (EBITDA) positive.
“It is unlikely for the company to turn around in the next quarter because we are in a challenging position but we are striving to at least turn our EBITDA positive first. In this situation, the emphasis will be on cash flow and EBITDA positive means to increase the utilisation rate in the second half of the year, say to 50 per cent.
“Hopefully, the price of rubber gloves can (increase) by around three to five per cent, so we can at least have EBITDA breakeven, then only can we look at in terms of turnaround,” he said during the glove maker’s third quarter financial year 2023 virtual briefing today.
In December last year, Top Glove had set a turnaround target of nine to 12 months.
Lim said ASPs of its gloves have bottomed out since the second quarter of FY2023 and are on an upward trend, with revision expected to persist.
In addition, he anticipates that nitrile prices are expected to go down 17 per cent from March to US$0.79 per kg in June due to lower feedstock prices, while natural rubber latex is projected to ease 13 per cent to US$1.08 per kg post-winter season.
Natural gas prices are expected to come down by about 11 per cent in July 2023 versus April this year given the global trend after reaching its peak in October 2022.
Natural gas soared 44 per cent in 2022, Lim noted.
Meanwhile, the vinyl glove oversupply situation continued to prevail causing lower volume and customers’ inventory depletion should spur replenishment activities in the second half of this year.
Currently, Top Glove’s total production capacity stood at 95 billion pieces of gloves after decommissioning of lines eased the group’s production capacity by five billion pieces of gloves.
“We will continue to study and also review the plan whether to further consolidate or not depending on the market situation,” Lim said, when asked about shutting down more plants.
As part of the Top Glove Turnaround Plan (T6), the group temporarily stopped production at 17 out of its 49 factories, in light of the softer global glove demand which the glove industry continues to contend with.
In the third quarter of FY2023, Top Glove reported a net loss of RM130.59 million compared with a net profit of RM15.29 million registered in the corresponding period a year ago.
Revenue for the quarter declined to RM530.62 million from RM1.49 billion previously amid higher nitrile and natural rubber latex prices as well as lower sales volume.
— Bernama
