Top Glove impressive earnings

From the Edge:

Top Glove’s third quarter of financal year 2015 (3QFY15) net profit of RM72.3 million exceeded ours and consensus’ expectations by a variance of more than 7%. Cumulative nine months (9MFY15) net profit of RM177 million accounted for 82.1% and 83.4% of ours and consensus’ full-year forecasts, respectively.

The growth in Top Glove’s revenue was mainly attributable to the increase in sales volume by 6% year-on-year (y-o-y) in 9MFY15 and a stronger US dollar against the ringgit. The increase in sales volume stemmed from both of its main glove segments, namely natural rubber gloves, which increased 9% y-o-y, and nitrile gloves, which increased 18% y-o-y. During the quarter, the average exchange rate for the US dollar against the ringgit was RM3.64 to US$1.

Meanwhile, the group’s 9MFY15 profit after tax and minority interests grew substantially by 19.5% y-o-y to RM177 million. The surge in earnings was mainly due to lower operating expenses, lower minority interest and a stronger US dollar against the ringgit. The operating expenses for 9MFY15 fell 1.4% due to the decommissioning of several old plants supported by the ongoing internal improvements in quality, efficiency and cost control measures. These lower operating expenses translated into better operating profit margin, especially for its Malaysian and Chinese operations.

The 9MFY15 margin for Malaysia is 13.7%, while that for China is 6.3%. The higher margins were mainly from its higher production of nitrile gloves, which carries a higher margin compared with natural rubber gloves.

Most people would think the rubber glove industry is a mature industry.  Apparently most people are wrong and Top Glove is proving it.  They were able to lower the costs of gloves.  This should not happen in a mature industry.  They will be reaping profits like no tomorrow until the others catch up.

Looks like most of the other glove makers are behind the curve.