Author: gloveharicut   |   Latest post: Thu, 24 Sep 2020, 5:07 PM


Ambitious growth agenda for TOPGLOV. Achieve Fortune Global 500 status by 2040. 100m investments in tech & AI every year.

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I am reproducing The Star article to my blog.




Insight - Ambitious growth agenda for gloves

AMIDST the heady excitement over their stock prices, glove companies are charting expansion plans in the belief that globally, the industry has long-term growth potential.

One such company is Top Glove which has been hogging the limelight as average selling prices (ASPs) of gloves keep surging.

While revisions in ASPs are made in line with market prices, its long-term plan is to expand the number of factories every year; it has a target to reach 500 factories to achieve Fortune Global 500 status by 2040.

With its investments in technology and artificial intelligence (AI), of about RM100mil per year, it may get there with less number of factories.

The retention of its gloves by the US Customs is seen as a temporary setback, and will not change its expansion plans.

With 2,000 customers across 195 countries, sales to the United States account for 24% of its glove sales as at the nine months of financial year (FY) 2020.

Overall, it aims to increase its market share for gloves worldwide from 26% to 30% by year end.

While still keen on acquisitions with good valuations; it will review future cases with greater caution, following its purchase of Aspion at a high price, for which it later claimed back some money.

Against its debt of RM2.3bil, it has a net cash position of RM284mil arising from strong profits delivered in the third quarter.

Following a rise in monthly sales orders by about 180%, the lead time for delivery has increased from 40 to at least 400 days till around September 2021.

Top Glove is also venturing into new products such as condoms, dental dams, exercise bands and recently, face masks, household products and plastic aprons.

If an effective vaccine against the coronavirus is found, urgent buying of gloves will likely reduce.

But pre-Covid 19, global demand for gloves was already growing between 8% and 10%, driven by strong fundamentals and across geographies.

“Post-Covid 19, demand for gloves is expected to grow around 12% to 15% per annum, on increased usage in the medical and non-medical sectors, ’’ said executive chairman Tan Sri Lim Wee Chai.

In the food industry, retail shops and airlines, there is a heightened awareness of safety and hygiene.

Even with a vaccine, gloves will be needed for testing and administering the vaccine.

Currently, about 20% of the world population, mainly in the United States, European Union and Japan, account for 70% of glove usage.

Usage of gloves is still relatively low in developing countries where it is experiencing rapid growth, while in developed countries, it has expanded to other sectors such as food and beverage.

The emergence of new health threats apart from Covid-19, a growing ageing population and progressively stringent health regulations in the United States and China, are some factors supporting the glove industry.Top Glove has set aside RM3bil for capital expenditure to build 450 new lines, creating new capacity of 60 billion gloves from calendar year (CY) 2020 to CY2026.

It will continue growing its nitrile glove segment in line with market demand; currently, it has 34 factories that will increase to 36 by December, with new capacity of 7.7 billion pieces, representing an increase of 9.8%, to 86.4 billion pieces annually.

By December next year, it plans to have 39 factories with new capacity of 14 billion pieces, or a 16.2% gain, to 100.4 billion pieces annually.

And by December 2022, it aims to have 41 factories with 6.2 billion pieces, at an increase of 6.2%, to 106.6 billion pieces annually.

Should demand for natural rubber gloves rise, Top Glove is able to adjust its production mix.

All new plants will be equipped with Industry 4.0 technology; with automation, the number of workers per million gloves has been reduced by 18% compared with six months ago.

It has redeployed more than 1,000 workers from Aspion since taking over factory operations, and another 1,000 workers through manpower reduction projects and automation.

It has 19,000 employees.

As Top Glove reduces its reliance on manual labour through further automation and digitalisation, “it will invest in intelligent and energetic people who can perform higher value tasks especially in research and development, engineering and information technology, ’’ said Lim.

For Top Glove to achieve the 500th place on Fortune Global 500 by 2040, it will need to grow by at least 30 times and achieve a revenue of US$35bil, from about 500 factories.

“As a Fortune Global 500 company, we must be ready to manage a huge operation, and to do things differently, ’’ said Lim.

Top Glove’s sales proceeds are denominated in US dollars while most of its costs are in ringgit; a weaker ringgit will be positive for the company but the industry norm is to share out any cost impact with its customers.

It will not allow its experience with the purchase of Aspion, deter it from pursuing mergers and acquisitions (M&As), and joint ventures with synergistic businesses; however, it is not in a hurry to conclude any M&As.Top Glove, which had bought Aspion via a combination of cash of RM1.23bil and shares, later said the amount had been overstated by RM640.5mil and claimed for RM714.9mil.

Under an amicable deal, its subsidiary Top Care received RM245mil in settlement.

Top Glove has invested in advanced technology incorporating artificial intelligence and robotic process automation; with a strong data foundation connected through the Internet of Things, it is able to progress into advanced analytics and predictive engines to further boost its capabilities.

The Exco sub-committee for Industry 4.0 has been expanded to include leaders from across the key departments.

Top Glove has implemented warehouse automation through autonomous guided vehicles; automated chemical batching systems and supervisory control and data acquisition (Scada) for automated process control.

It also has AI empowered vision systems for glove inspections and next generation glove packing machines.

In terms of business transformation, there will be tighter integration between its enterprise systems, eliminating of data silos and streamlining of access to enterprise data.

For the transition to cloud platforms, all acquired data will be aggregated into a “data lake” for advanced insights and analytics.

The company will venture into predictive technologies for factory operations, demand forecasting and supply chain integration.

Operational and market-related issues aside, Top Glove is following its long-term plan that will place it in a stronger position, capturing markets that are under-utilised in gloves.

The views expressed are the writer’s own.


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TOPGLOV 8.55 +0.53 (6.61%) 98,426,100 

  HNWInvestor likes this.
Aug 4, 2020 3:33 PM | Report Abuse

The 2 weeks down time for calling BI was over for both SUPERMX n TOPGLOV.
VALUE creation begins now today...
More fast VALUES r awaiting after the ex BI dates .,.

TOPGLOV 2:1 Bonus ex date on Thu Sep 3rd
SUPERMX 1:1 Bonus ex date on Fri Sep 4th
04/08/2020 4:27 PM

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