World's biggest glove maker Malaysia sees 15% growth in 2020

17, Jun. 2020

Photo by Gustavo Fring from Pexels
Photo by Gustavo Fring from Pexels

By Charlotte Chong

KUALA LUMPUR, NNA - As country economies and countless businesses are taking a big hit from the coronavirus lockdowns sweeping the world, players in the health and safety sectors have been making money while scrambling to protect lives.

Such as the glove makers in Malaysia, the world's leading producer of protective handwear which has seen an explosion in demand following the outbreak of the novel coronavirus in China in late December.

This has led to chronic shortage of rubber gloves, reported Malaysian Rubber Glove Manufacturers Association (Margma) whose members have been coping with orders piled up till next year.

In 2019, around 296 billion gloves were sold in the world, of which about 63 percent came from Malaysia. But this year, global consumption is expected to hit 330 billion pieces with Malaysia providing 66 percent or 220 billion gloves, according to Margma.

Malaysian producers have reported record sales after the country exported 53 billion gloves in the first quarter of the year.

All the top four glove makers cited a surge in demand as health needs and concerns took hold in countries all over the world trying to combat the deadly pandemic which has now killed over 430,000 people.

They are Top Glove Corporation Bhd, Supermax Corporation Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd.

Leading the pack is Top Glove whose net profit jumped 4.7 times to 347.9 million ringgit ($81.4 million) in its third quarter ended May 31. Its revenue went up 41.8 percent to 1.69 billion ringgit.

Sales shot up to a record 24 percent more than the same quarter last year, said Top Glove in a statement.

Margma President Denis Low told NNA in an email on Tuesday local glove makers have been stretched with big orders till they are fully booked till next year. The business is currently oversold by six to eight months ahead, he added.

“It simply means that if we are not responsible enough to expand, the world’s healthcare workers… would be in dire exposure to diseases and viruses,” Low cautioned.

Low said Malaysia leads the world in medical glove production supplying 65 percent to the market. This is followed by Thailand (18 percent), China (9 percent) and Vietnam, India and Indonesia taking up the rest.

Meanwhile, Low has urged the 57 member-producers to expand production facilities and produce faster to meet demand and the 15 percent growth target post-COVID19 this year. Annual growths came up to around 10 percent previously.

Low said availability of materials has never been an issue even during the height of COVID-19 pandemic. But rather, the bottleneck could be caused by the rush to build bigger plants and faster machinery, which in turn, might have put a strain on contractors and hand mold makers.

In fact, all the four leading glove markers are already in the midst of expanding. Supermax announced last Tuesday that it had entered into a deal to acquire land in Klang, Selangor State in order to double its production to 44.1 billion pieces annually by 2024.

Likewise, Hartelga is expected to increase production by more than 70 percent to 76 billion pieces annually by 2029.

Automation in the glove sector over the past few years has resulted in much higher productivity.

"We would only need 1.7 people to produce 1 million pieces of gloves currently" compared to 12 people previously, said Low. “It is our target to further trim it down to just 1.2 people within the next three years,” he added.

Low believes people would still want to protect themselves even after the easing of lockdown measures.

“As activities start to claw back to its pre-lockdown position… people would want to be protected and they will put on face masks and gloves to be safe,” he added.

Apart from medical providers, businesses most likely to use hand gloves in their operations include food and beverage (F&B), laboratories, airlines, emergency services, tattooists and housewives.

“Flight attendants would have to change their face masks and gloves every three hours. That will cause a huge demand for gloves over and above an already very chronic shortage,” he told NNA.

The pandemic has also raised widespread awareness among ordinary people of the importance of hygiene, thus bringing in a pool of new users, Low added.

In addition, big pharmaceutical firms adding gloves through their pharmacy channels and governments have become some of the biggest buyers.

The medical examination gloves, nitrile gloves and natural latex gloves are the most commonly sought after, Low said.

Analysts are also upbeat on the glove sector with expectations that it would grow further in the post-pandemic era.

Nabil Fikri Zainoodin, a KAF Investment Bank Bhd analyst, said that the industry has seen glove prices for immediate delivery soaring more than threefold. Some buyers didn't seem concerned about having to pay much more as they had already locked in orders for next year's delivery.

“We strongly believe that the earnings growth momentum will continue next year,” he told NNA.

While noting that glove makers are already ramping up production to cater to the surge in demand, he does not "discount the possibility of an elevated inventory level given that glove products have a long shelf life.”

Ng Chi Hoong, an analyst at Affin Hwang Investment Bank Bhd, believes glove markers would still be able to sell their products at a decent margin as the incoming new capacity is unlikely to meet the current demand.

“Demand for rubber gloves is only likely to normalized when there is a vaccine for COVID-19, as most of the increase in demand is for consumption rather than inventory stocking,” he told NNA.

However, he sounded a word of caution. The glove industry might face difficulty in securing raw materials readily as some suppliers might curb capacity due to falling prices in raw materials, he said.