TOP GLOVE sees 8%-10% demand growth

Malaysia’s Top Glove Corporation Bhd expects demand to grow by 8% to 10% in the next two years and will raise its annual production capacity by 25% by May 2011, a senior company official said.

The world’s largest rubber glove maker by production capacity, was now seeing a normalisation in demand as the flu outbreak was no longer a concern, executive director Lim Cheong Guan said.

“With the normalisation in demand for gloves following the dissipating worries of H1N1 flu outbreak, we expect customers to replenish their orders following the lower rubber prices,” Lim told Reuters via email.

Lim said orders from the European and Latin America markets were slowing down temporarily due to their weakening currencies, although orders from the US, in particular North America, had been growing by more than 10% since early this year.

A stronger ringgit will also hurt glove makers’ profits as their products are sold in US dollars. Yesterday, the ringgit touched a 13-year high at 3.12 to the dollar, its highest since October 1997.

“Thus, any fluctuations in the currency will have an impact on our revenue and earnings in the short term,” Lim said.

Analysts say higher latex prices may also hurt rubber glove makers’ bottom line, as customers would increase inventory holdings only when latex prices dip further.

The price of latex, from which gloves are made, reached a high of RM7.75 per kilogramme in April this year. Rubber glove makers have embarked on aggressive expansion plans in recent years to ride on growing demand, prompting fears that supply may soon outstrip demand. Top Glove is constructing three new factories in Malaysia as well as putting up 88 more production lines in existing plants in Malaysia and Thailand. — Reuters


This article appeared in The Edge Financial Daily, August 20, 2010.