Top Glove optimistic of good dividends

Top Glove optimistic of good dividends
Published: 2009/10/14

TOP Glove Corp Bhd's shareholders can expect better dividend income going forward based on the company's optimism of continuing to record double-digit growth for at least 1-2 years more based on strong demand for rubber gloves and its expansion.

For financial year ended Aug 31, 2009 (FY09), the world's largest rubber glove manufacturer paid a dividend of 22 sen, a 100 per cent increase from 11 sen previously.

Its chairman Tan Sri Lim Wee Chai said the company, which targeted to pay 30 per cent dividend annually, would consider a special dividend if it continued to record strong performance.

"The chances are always good for us to achieve growth of more than 10 per cent, at least for the next one to two years and this will translate into a possible high dividend.



"With good earnings and strong cash, we should also be able to pay a good or even better dividend in the coming years," he told a media briefing on the company's performance for 2009 financial year in Kuala Lumpur today.

As at Aug 31, 2009, Top Glove's cash in banks stood at RM197.2 million and total borrowings at RM20.5 million.

Lim said the global demand for rubber gloves grew at between 8-10 per cent annually.

He said Top Glove had enough cash to pay dividend and the land for expansion.

The company, which has been on expansion mode with the opening of a new factory every year, is enthusiastic about increasing its capacity either through organic growth or acquisitions.

Currently, it has the capacity to produce 31.5 billion pieces of gloves annually, but that will be increased to 34.5 billion next year with the operation of factory number 20 in February next year and factory number 21 somewhere in the middle of next year.
Each factory has the capacity to produce 1.5 billion pieces annually.

At the moment, it has 17 gloves factories and two latex concentrate factories and its target is to capture 30 percent of the global market by 2012 compared to 22 percent now.

Lim said the company's capital expenditure for FY2010 was RM70 million.

He said the company would continue to expand its manufacturing plants in Malaysia, Thailand and China.

"We have the land to build one or two more factories every year to meet the increasing demand," he said.

The company has 7.2 hectares in Klang for future development, 8.4ha in Thailand and six ha in China.

He said investment in China was a challenge as many companies had suffered losses.

Top Glove's venture, however, is profitable, he said.

On acquisition, he said, although Top Glove was receptive it would be careful as not all acquisitions would be successful.

He said money alone would not ensure the success of the acquisition as there were also a need for adequate resources in areas such as human resources and marketing.

For FY09, its pre-tax profit rose by 65 per cent to RM221.5 million from RM134.6 million in the same period of 2008.

Revenue surged 11 per cent to RM1.53 billion from RM1.38 billion previously.

The record profit has been achieved on a high EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 18.7 per cent in FY2009 compared to 14.4 per cent in FY2008.

Executive director, Lim Cheong Guan, said the 18 per cent plus margin was on the high side and did not expected a repeat in the near term.

Lim, however, still expected the margin to be in 16-17 per cent range going forward based on strong demand for rubber gloves.

Meanwhile, another executive director, Lee Kim Meow, said the prospect for the rubber glove industry was bright given its resilience to recession and rising demand due to increase awareness among the governments on global health threats.

"We expect government allocations for healthcare-related products such as gloves, to increase in future and this will boost our business," he said.

China and India, including Malaysia spent about 4.5 per cent of their gross domestic product on healthcare compared with the US at 15.3 per cent.

Top Glove rose 24 sen to close at RM8.40 on Bursa Malaysia today. -- BERNAMA


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