10 Things to Know About Top Glove Corporation Berhad’s Second Quarter Earnings

Founded in 1991, Top Glove Corporation Berhad (SGX: BVA) is today the world’s largest rubber gloves manufacturer. Its gloves are used in the medical, food, and general industrial sectors, among others. The company, which has a primary listing on Malaysia’s stock market, was dual-listed here in Singapore in June 2016.

Today, the rubber gloves manufacturer announced its financial results for the second quarter ended 28 February 2018. Here are 10 things investors should know from the earnings announcement:

1. For the quarter, sales volume rose by 21% year-on-year. This brought about a top-line growth of 12.6% to RM958.4 million.

2. The increase in sales volume was largely due to higher demand for natural rubber gloves, “underscoring the importance of having a balanced product mix, comprising both natural rubber and nitrile gloves, which is aligned with market demand”.

3. Profit from operations went up from RM104.1 million to RM125.2 million, an increase of 20.2% year-on-year.

4. Net profit improved by 31.3% to RM109.0 million. Consequently, diluted earnings per share climbed from 6.62 sen to 8.68 sen.

5. The net profit margin for the latest quarter came in at 11.4%, up from 9.8% in the previous year’s corresponding quarter.

6. Top Glove’s balance sheet weakened for the quarter. As at 28 February 2018, the firm had RM185 million in cash and bank balances, and RM585.3 million in total borrowings. In comparison, six months prior, it had a cash hoard of RM240.1 million and a total debt of RM418.5 million. The company’s balance sheet also carried RM135.3 million worth of investment securities at the end of February 2018, compared to RM206.9 million, as at 31 August 2017.

7. The rubber gloves manufacturer generated RM67.7 million in operating cash flow for the second quarter, up from RM23 million a year ago. With a capital expenditure of RM111.3 million, the firm had a negative free cash flow of RM43.6 million for the latest quarter. In comparison, a year ago, it had RM137.4 million in negative free cash flow.

8. The firm did not declare any dividend for the second quarter.

9. Tan Sri Dr Lim Wee Chai, Top Glove’s executive chairman, commented on the latest performance:

“We have delivered a solid set of numbers which include our highest year-on-year Volume growth and strong growth in Profit, in spite of the shorter work months within the quarter and cost increases. It is not easy to do well in a challenging environment and we believe our commendable performance is largely credited to our commitment towards continuously improving our quality and the cost efficiency of our manufacturing operations”.

10. Top Glove is looking to grow through both organic and inorganic means. It is currently constructing two manufacturing facilities, and when they come onstream by early 2019, the total number of production lines will be boosted by an additional 78 lines and production capacity by 7.8 billion gloves per year. Also, Top Glove’s new condom manufacturing facility is expected to start operations by June this year. On the inorganic expansion front, Top Glove’s acquisition of Aspion Sdn Bhd is targeted for completion by early next month.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Top Glove Corporation Berhad. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.