(Bloomberg) — Top Glove Corp. fell to its lowest level since April 2020 after it reported a 92% slump in first-quarter earnings and deferred expansion plans due to weaker demand and stubbornly high raw material costs.
Shares of the world’s biggest glove maker plunged 10.4% Friday, the steepest drop since July 2018 and the worst performer on the benchmark equity index. The stock has plunged 64% this year, following a 291% surge in 2020 on a pandemic-driven jump in sales.
The selloff came after the Malaysian firm announced that net profit fell sharply to 186 million ringgit ($44 million) in the three months ended Nov. 30. Revenue slid 67% to 1.58 billion ringgit as the massive global rollout of Covid vaccines hit demand for and prices of its products.
The company said it expects the challenging environment to be partially offset by regaining exports to the U.S. market, which accounts for 15% of the group’s sales. The U.S. lifted an import ban on Top Glove’s products in September, after which the company has recovered half of its pre-ban shipment volume on that route.
“After several quarters of being on the up, we’re transitioning from new normal back to the old normal,” executive director Lim Cheong Guan said at a briefing. Top Glove is delaying plans to add capacity as part of “adjustments” to moderation in demand for protective gear, he said.
The average selling prices of gloves are expected to drop 5% on-month going forward versus 10% earlier, Sophie Chua Siu Li, an analyst at Hong Leong Investment Bank wrote in a note on Monday. Headwinds are unlikely to dissipate soon as prices have now fallen closer to pre-Covid levels, she said.
Other highlights from the briefing:
- Customers are cautious about purchasing despite the emergence of the omicron variant, Group Managing Director Lee Kim Meow said
- Some customers and countries may refill inventory going forward, he added
- Top Glove continues to look for good mergers and acquisitions opportunities, Chairman Lim Wee Chai said
- Lim expects the industry to see some consolidation in the next one to two years
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