Top Glove shares quarterly update on ongoing quality and cost optimisation measures

The Group has affirmed its focus on enhancing people productivity, post the closure of the manpower restructuring exercise.

Leading Malaysian manufacturer of disposable rubber gloves, Top Glove, has announced its financial results for the third quarter (Q3) ending 31 May 2023, demonstrating improvements in results, a decline in sequential operational losses, driven by increased average selling prices (ASPs) as well as attributed to the ongoing quality and cost optimisation measures.

As of Q3 2023, the Group’s overall operating performance improved as Loss After Tax reduced by 23% from Q2 2023, attributed to an increase in glove ASPs of 6%, coupled with quality and cost optimisation initiatives to streamline operations. The measures employed to streamline operations includes:

• Decommissioning obsolete production lines
• Temporarily stopping production at 17 out of its 49 factories, in light of the softer global glove demand
• In addition, the Group implemented a manpower restructuring exercise.

Noting that a glove price increase will have an impact on its sales volume, the company pointed out that, going forward, glove manufacturers are unable to fully absorb rising costs indefinitely, as such "this is a necessary step for the long term sustainability of the glove industry".

Charting its path to recovery, the Group has in place a six-point comeback strategy, called the 'Top Glove Turnaround Plan (T6)'. This entails:

• Boosting sales volume,
• Enhancing quality,
• Consolidating facilities,
• Enhancing people productivity,
• Strengthening cash flow position, and
• Optimising supply chain.

Lim Cheong Guan, Managing Director of Top Glove noted that while the company is still in a loss position, what's encouraging is that the quantum of operational losses has reduced from the previous quarter. He added: "Guided by our six-point turnaround strategy, we will continue to navigate the challenging business environment by improving our sales revenue, enhancing quality, eliminating wastage, optimising resource allocation, trimming expenditures and streamlining our processes, towards greater financial efficiency and sustainability."

On the recent round of manpower restructuring, he remarked: "Although a difficult decision, the recent workforce rationalisation exercise undertaken following the temporary stopping of production at some factories to reduce the glove oversupply situation, was an important step towards the Group’s continual endurance and competitiveness in the long term. We remain deeply appreciative of the contributions of all our people."

The Group also called out its commitment to upholding the United Nations Guiding Principles on Business and Human Rights (BHR), with support from the Board and Board Committees who have oversight of the various BHR initiatives. The Group has embarked on BHR and traceability training for vendors, to enhance robustness of its supply chain.

On the forward outlook, the statement noted the business environment is expected to remain challenging and competitive throughout the 2^nd half of calendar year 2023; however, the Group is optimistic on long-term prospects as gloves continue to be an essential item for single usage in the healthcare and food industries.

MD Lim observed that while the past two years have seen oversupply and customer stockpiling of gloves, glove consumption itself has not decreased. "On the contrary, glove consumption has gone up post pandemic, on the back of elevated hygiene and health awareness."

He concluded: "As customers’ and manufacturers’ glove inventory is close to depletion, replenishment activity is expected to commence in the second half of calendar year 2023, spurring an uptick in glove demand. With this, alongside our T6 turnaround initiatives and measured increases in ASPs, we are hopeful of seeing a steady improvement and better days ahead."

Thank you for reading our story! Please leave us a comment if you enjoy our content — take our 2023 Readers' Survey here.

Lead image / Top Glove