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3 Things I Like About Top Glove Corporation Berhad’s Latest Financial Results

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.

Top Glove announced its financial results for the third quarter ended 31 March 2018 on Tuesday (19 June 2018). Here are three things I like about the latest earnings.

Strong growth in numbers

Quarterly revenue grew 26.6% year-on-year to RM1.1 billion. It marked the first time Top Glove achieved revenue of more than RM1 billion in a single quarter. Sales volume rose by a historical record high of 37% year-on-year. The robust set of numbers was due to an “increased glove demand, which Top Glove’s balanced product mix is well positioned to cater for”.

Profit from operations surged 58.3% to RM147.3 million while profit attributable to shareholders climbed 51.3% to RM117.6 million. Consequently, net profit margin for the latest period came in at 10.7%, up from 8.9% a year ago.

The higher demand for Top Glove’s products also led to better cost efficiencies resulting from a higher utilisation rate. The company said that its “focus on continuous quality and cost improvement initiatives, and harnessing technological advances to address business challenges also accounted for the improved profitability”. Lower raw material prices also led to the higher profit margin.

Rewards for faithful shareholders

Top Glove’s shareholders will receive an interim dividend of 7 sen per share for the latest quarter. This is higher than the dividend of 6 sen per share declared in the third quarter of 2017.

The board has also proposed to undertake a bonus issue on the basis of one bonus share for every one existing Top Glove share held. The bonus issue will be subject to shareholder approval during an extraordinary general meeting to be convened later.

Growth in the years ahead

Top Glove is expanding its manufacturing capabilities, both organically and inorganically, to grow in the future.

Currently, it is constructing two factories – Factory 31 (operational by July 2018) and Factory 32 (operational by early 2019). Once completed, they will increase Top Glove’s total number of production lines by another 74 lines and production capacity by 7.4 billion gloves per year.

Furthermore, the rubber gloves manufacturer’s condom manufacturing facility is expected to start production by the end of this month.

In terms of inorganic growth, Top Glove mentioned the following:

“The Group completed its acquisition of Aspion Sdn Bhd on 5 April 2018 and integration of the 2 businesses is in progress. In line with the Group’s expansion plans, in May 2018, Top Glove also completed its acquisition of Duramedical Sdn Bhd, a company manufacturing and marketing dental hygiene products such as dental dams, for the purchase consideration of RM2.85 million. The exercise represents an initiative to diversify into medical related products catering to its customer base.”

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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.