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2023-10-10 09:27 | Report Abuse
This article first appeared in The Edge Malaysia Weekly on October 9, 2023 - October 15, 2023
Top Glove Corp Bhd’s downward spiral continues. Last Friday, the world’s largest glove maker by output, announced its biggest quarterly net loss of RM463.15 million for its most recent quarter ended Aug 31, 2023 (4QFY2023), mainly due to impairments amounting to RM389 million.
Even after stripping out the impairments, Top Glove remains in negative territory, posting a net loss of RM65 million — its fifth straight quarter of losses — hit by excess capacity and falling average selling prices.
Top Glove has maintained that the goodwill impairment of RM138 million and the impairment and write-off of property, plant and equipment of RM251 million was a “one-off” action and has no impact on cash flow.
Still, the latest writedown exercise has put the spotlight on the aggressive share buybacks Top Glove undertook over the past three years to defend against selling pressure on its shares amid falling glove demand. The company spent as much as RM1.42 billion at one point between October 2020 and February 2021.
Critics have pointed out that management could have opted then to return the excess cash to shareholders as dividends, or used the extra capital to prepare for rainy days as the supernormal demand for rubber gloves because of the Covid-19 pandemic in 2020 would not last forever.
As it is, the company’s cash pile has been depleting, which could prove more challenging for the glove maker to ride through a prolonged period of overcapacity. Its cash and bank balances stood at RM290.1 million at end-August 2023, down from RM437.6 million a year earlier. At the same time, its non-current assets were RM5.37 billion versus RM6.01 billion a year ago.
Shares of Top Glove have fallen 16.6% year to date to close at 75.5 sen last Friday, giving it a market capitalisation of RM6.05 billion.
Following the operational rationalisation exercise and a review of the group’s income-generating assets, minority shareholders and investors will be keen to see how quickly Top Glove can reverse its fortunes.
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Stock: [TOPGLOV]: TOP GLOVE CORPORATION BHD
2023-10-10 12:19 |
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