KUALA LUMPUR (Nikkei Markets) -- Malaysian rubber glove maker Top Glove Corporation said Friday its net profit jumped 51% in the fiscal fourth quarter thanks to higher sales volume, and the company plans to acquire a packaging material firm to improve its supply chain.
Net profit for the three months ended August 31 totalled 98.62 million ringgit ($23.39 million) compared with 65.32 million ringgit in the same quarter last year, Top Glove said in an exchange filing. Quarterly revenue rose 25% year-on-year to 902.42 million ringgit from 722.11 million ringgit.
"The operating environment ahead is expected to be characterised by intense competition and rising costs," Top Glove said. "Notwithstanding the challenging business environment, Top Glove will continue to expand strategically."
Top Glove, the world's largest rubber glove producer by volume, has been building new factories to boost capacity and has sought to acquire smaller rivals in an ambitious bid to capture 30% global market share, expanding from the current level of about 25%. The company currently cranks out as many as 48 billion pieces of gloves annually from 30 factories.
By December 2018, Top Glove aims to operate 31 factories manufacturing up to 59.7 billion pieces of gloves a year. Top Glove has also started works on its condom manufacturing facility that is expected to be operational next year.
"The earnings came in slightly above my expectations and in line with consensus," said Hong Leong Investment Bank's analyst Sheikh Abdullah. Net profit in the next fiscal year could rise by around 30 million ringgit, or up to 11%, as the company expands capacity to meet sales demand, he said.
For its full financial year, net profit fell 7.8% to 332.70 million ringgit from 360.73 million ringgit as raw material costs climbed. Average natural rubber latex price surged 46% to 5.76 ringgit a kilogram, while the average nitrile latex price rose nearly 12% from the previous year to $1.1 per kilogram.
"Top Glove will also continue to explore inorganic expansion via mergers and acquisitions, as well as new set-ups in related industries in order to grow faster and more efficiently," the company said.
The company signed a term sheet to acquire Eastern Press for an indicative price of 47.25 million ringgit. The deal, which comes with a net profit guarantee of 4.50 million ringgit for the financial year ending October 2018, will undergo due diligence for two months under an exclusivity clause, the company said.
"While gloves will continue to be its core business, the group will diversify into other revenue sources," Top Glove said without elaborating further.
Shares of Top Glove rose 1.4% to 6.01 ringgit while the benchmark FTSE Bursa Malaysia KLCI ended 0.1% higher.