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Coronavirus

Top Glove goes from COVID hero to workplace health risk

Labor shortage hits Malaysian maker after virus forces lockdown in dorms

A worker inspects newly made gloves at a Top Glove factory in August 2020.   © Reuters

KUALA LUMPUR -- Top Glove, one of the early winners after the coronavirus outbreak, is now reeling after thousands of its workers tested positive for COVID-19, forcing many of its Malaysian factories to shut down.

The world's largest medical gloves supplier is facing a critical labor shortage after the government placed key worker dormitories under lockdown until the end of November. Top Glove says it expects subsequent production delays to affect projected sales.

Since Nov. 17, about 16 factories in central Malaysia have been closed while another 12 are running at minimal capacity, the company told Nikkei Asia in an email.

Top Glove's 36 glove factories have a yearly capacity of 90 billion units.

"We expect delays in some deliveries by about two to four weeks, as well as a longer lead time for orders, and estimate a possible 3% impact on projected annual sales for the financial year 2021," the Malaysian company said. It added that sales orders and deliveries are being redirected to lesser affected factories.

Top Glove's market value rocketed this year after demand for gloves soared, sparked by the spreading coronavirus. But factory lockdowns and news that drugmakers are making progress toward a COVID vaccine have caused a sell-off.

Shares have fallen over 28% from a peak of 9.47 ringgit on Aug. 7 to settle at 6.80 ringgit on Tuesday, shaving more than 15 billion ringgit ($3.67 billion) off the company's market cap within the three-month period.

Malaysian health authorities have found a cluster in the dorms, with 4,036 cases confirmed as of Tuesday out of 5,777 workers tested. The cluster accounts for over 28% of the country's more than 14,000 COVID infections.

Most people in the cluster are employees of Top Glove, while a minority is comprised of close contacts. Almost 3,900 of the cases involve non-Malaysians, highlighting the company's heavy reliance on foreign labor.

Malaysia's powerful National Security Council decided earlier this week that all of Top Glove's more than 13,000 employees in the country would be subject to testing.

Thong Pak Leng, an analyst at AmInvestment Bank, said that about 20 of the 28 closed factories are glove production facilities with a combined yearly capacity of 45 billion units.

"The company is planning to increase the intake of local workers to overcome labor shortages," Thong said, noting that the company has been hiring local workers since March to reduce dependency on foreign employees. Presently, some 2,000 of its 13,700 workers are Malaysian citizens.

Ng Bei Shan of MIDF Amanah Investment Bank said the reduction in capacity could cost Top Glove around 4% in projected net income for the current financial year, assuming average selling prices remain the same. "If operations are affected by up to a month, net income may be hurt by 8%," the analyst added.

Top Glove said it will continue to adhere to regulations aimed at preventing COVID-19. "Disinfection exercises at our premises and accommodation are also conducted regularly, with all the necessary precautionary measures strictly in place," it added.

Andy Hall, an Asia-based activist for human rights and migrant workers, said he believed proper precautions were not taken by Top Glove, thus allowing the rapid spread of the virus.

Hall said Top Glove workers have complained about a lack of social distancing and protection from COVID at their workplaces and in cramped accommodations.

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