In March of this year, the world’s largest rubber glove manufacturer was named Asia’s Best Employer by a magazine for the fifth consecutive year. Top Glove seems to have ended its strong performance after a turbulent 12 months.
Since reports of the new coronavirus in China a year ago, the Malaysian personal protective equipment manufacturer’s stock price has soared by more than 500%.
However, the stock price was hit by the vaccine approval at the end of 2020.Then, the day after the award in March, U.S. Customs and Border Protection Order seizure Top Glove’s products were accused of using forced labor when they arrived at a US port.
The US accusations eclipsed the wealth of one of the world’s biggest beneficiaries of the pandemic.In the early days of Covid-19, the company’s rise was so fast that Lin WeicaiAccording to the founder and chairman of Top Glove, his wealth has nearly tripled to 3.5 billion US dollars in the 12 months ending in April. Forbes, Making him the eighth richest man in Malaysia.
Today, in addition to the US seizure order, the company’s prospects are also clouded by the rapid launch of vaccines in developed markets, which may reduce the demand for top glove products and increase competition from low-cost Chinese manufacturers.
Top Glove announced last week that its quarterly sales revenue fell 22% to 4.16 billion ringgit (1.01 billion US dollars), but it still increased by 147% year-on-year. The company attributed its weak third-quarter earnings to latex price increases and a 16% drop in the average selling price of gloves.
“From every peak, there will always be a correction,” Li Jinmiao, the managing director of Top Glove, told the Financial Times.
The company also said that the third quarter’s revenue decline was due to the US ban. North America—the largest market for top gloves and the most expensive gloves—sales volume fell by 68% in the third quarter.
Ng Chi Hoong, an analyst at Affin Hwang Capital in Malaysia, said the group may have to lower prices to attract buyers in new markets. Top gloves are “forced to find new ways to fill the gap left by the US market.”
Top Glove’s Lim said in a statement that the US order underscores allegations of forced labor related to the Malaysian glove industry over the years and also postponed the company’s US$1 billion listing in Hong Kong, “delayed for a few more months. “. Earnings call.
He said the company had resolved the issue of the Customs and Border Protection Agency and was “just waiting” for the agency to verify payment and remedial measures for top gloves. The US agency told the Financial Times that it was negotiating with Top Gloves, adding that it would only cancel such orders if there is evidence that forced labor is no longer used.
The U.S. import ban was implemented after a top glove employee Died of Covid-19 Last year, the company’s factories and workers’ dormitories broke out in an epidemic when Malaysian authorities said these places were crowded, uncomfortable and lacking proper ventilation. The epidemic has since been brought under control.
Top Glove, which has nearly 12,000 foreign workers in Malaysia, said it will invest 200 million ringgits to add dormitories for 14,200 employees. It said that the conditions of its dormitories now meet or exceed the requirements of Malaysia’s new workers’ housing law that took effect last year.
Norges Bank Investment Management, which oversees Norway’s 1.3-ton oil fund, voted against the election of several directors at the annual meeting of Top Gloves in January. The fund, which holds a 0.89% stake in the top glove valued at US$109 million, declined to comment.
When asked about the vote, Lee stated that institutional investors “may not be satisfied with what happened last year” and added that the company is working to improve its interaction with shareholders.
Lim of Top Glove said that the US ban is “temporary,” but analysts believe it will not be lifted until the end of the year.
“although [Top Glove] Ng of Affin Hwang Capital stated that under the guidance that they have corrected all indicators under the guidance of the ILO, we expect the ban to be lifted by the end of 2021.
Patrick Stokvis, vice president of the research company Third Bridge, said in a report that the review of top glove labor practices “will continue to drive up the cost of rubber glove manufacturers in Malaysia.” This may weaken their cost advantage over Chinese competitors.
However, Top Glove’s Lee predicts that as countries hoard gloves in response to future health crises, demand for their products will remain strong.
Supramaniam Shanmugam, chairman of the Malaysian Rubber Glove Manufacturers Association, said that the consumption of gloves will not gradually decrease due to vaccines. He added that this pandemic, like the SARS outbreak in 2003, will stimulate long-term demand for protective equipment.
The association estimates that global demand will increase by 18-27% in 2021, reaching 420 billion gloves, of which about two-thirds will be produced in Malaysia.
Analysts believe that although Top Glove seems to have resolved the allegations of forced labor, the US ban needs to be lifted to alleviate investor concerns.
“What we have done in the past is not good enough,” admitted Li of Top Gloves.