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Malaysia's Top Glove Q3 earnings dented by US import ban

But net profit and sales surge from same period last year as pandemic worsened

Malaysia's Top Glove says a ban on its products in the U.S. has hurt sales.   © Reuters

KUALA LUMPUR -- A ban on Top Glove-manufactured products in the U.S. contributed to double-digit declines in revenue and net profit in the three months ended May 31 from the previous quarter, the Malaysian medical glove maker announced on Wednesday.

Revenue and net profit fell 22% and 29%, respectively to 4.16 billion ringgit ($1 billion) and 2.06 billion ringgit in the financial third quarter from the second, the company said in a stock market filing.

But compared with the same period last year, which marked the early stages of the coronavirus pandemic, net profit soared 485% and sales jumped 147% on increased demand for latex gloves.

"The sales volume (quantity sold) eased 4% quarter on quarter mainly due to a reduction in sales to the U.S., following a temporary halt in shipments to the U.S. from Malaysia, in compliance with requirements of the U.S. Customs and Border Protection (CBP)," the filing said.

Top Glove and its peers have been the primary corporate beneficiaries of the pandemic since early last year, due to global demand for their products.

But the CBP in March slapped the company with a U.S. import ban, citing evidence of forced labor in Top Glove's facilities in Malaysia.

Amid the prohibition, sales volume declined 68% in North America during the third quarter from the second, Top Glove said. They also fell 14% in Western Europe, but surged 82% in Africa and 66% in Latin America.

Besides the U.S. ban, other factors affecting the quarterly results include adjustments in global prices for gloves after average selling prices peaked in February 2021 amid the coronavirus pandemic.

Speaking during a remote media briefing, Lim Wee Chai, Top Glove's executive chairman, said the CBP ban has temporarily delayed the company's proposed listing on the Hong Kong Stock Exchange.

"Listing in Hong Kong is for [the] long term but the CBP's delay is only temporary," he said, adding that the listing process is ongoing.

For the first nine months of the financial year, Top Glove registered 7.26 billion ringgit in net profit, representing a jump of 1,163% from the same period last year. Revenue also rose 246% to 14.29 billion ringgit.

Lee Kim Meow, Top Glove managing director, told the same briefing that the company remains positive even as more countries start administering coronavirus vaccines, saying that gloves would remain essential even after herd immunity has been achieved.

"It's a good thing if more people get vaccinated, but if you go [to] the vaccination centers, gloves are widely used," he said. "We are expecting gloves to remain essential even after, due to increasing awareness [of] personal hygiene."

He also said Top Glove estimates demand for gloves will grow from a pre-pandemic level of about 10% annually to about 15% post-pandemic.

According to the executive, in tandem with the growth prospects, the company will embark on a combination of expansion and strategic investment.

By end of 2024, Top Glove is projected to have a total of 47 glove factories -- comprising 1,512 production lines with a capacity of 205 billion gloves a year, he said. It currently has 37 glove factories.

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