Posted by Arno Maierbrugger on September 26, 2013
Top Glove CEO Tan Sri Lim Wee Chai
Top Glove, one of Asia’s largest rubber glove manufacturers, is expanding steadily. Inside Investor asked CEO, Tan Sri Lim Wee Chai about the latest developments
Q: In our last interview in 2012 you said you are on target with a growth of 30 per cent in 2012 for Top Glove. Did the strategy work out?
A: We targeted a 30 per cent global market share, but have not achieved it yet as this will only be attainable through a combination of organic growth and inorganic growth, ie. via the mergers and acquisitions route. While our organic expansion is on track, we have as yet, not identified suitable partners for M&As.
Q: You also said that Top Glove is setting up two new factories every year, from the existing 23 earlier this year. At what count are you now? There was news that Top Glove is planning to set up no less than 40 new factories in Malaysia.
A: Our factory expansion plan targets to put on-stream 1 to 2 new factories each year. Year-to-date, we have added 2 new factories, which brings the count up to 27 factories. The announcement of 40 new factories was in relation to our commitment of an investment of RM3.8billion over a period of 15 years, as an Entry Point Project under the Economic Transformation Program (ETP). While we are on track, we are mindful not to establish new facilities to make up the numbers, at the expense of getting it right. In line with our corporate values, we aim to “Do it right the first time and every time” and have to ensure that the blueprints for our factories are sound and that there is sufficient demand for these factories to cater for. Moreover, our investment direction is also to earn 2 healthy dollars and invest 1 efficient dollar.
Q: Has global demand for rubber gloves suffered from the crisis in the EU and the US?
A: There has been no impact, as rubber gloves are deemed essential items in the healthcare industry, rendering them “demand-resilient”. Besides, even with austerity measures involving healthcare spending cuts, rubber gloves as low-cost medical consumables are not affected, unlike bigger ticket items like medical equipment which potentially could be.
Q: Have there been new big contracts with health institutions/government/companies since we spoke last year?
A: Top Glove does not market its products directly to health institutions or governments. We prefer to focus on distributors and concentrate our efforts on servicing more multinational corporations, which has contributed significantly to our 15 percent year-on-year volume growth.
Q: Austrian rubber manufacturing company Semperit bought your competitor Latexx Partners Bhd, propelling it to rank 2 in the global rubber glove market behind Top Glove. Are you expecting sharper competition from now on?
A: While Semperit’s acquisition of Latexx Partners has increased its size, there has been no increase in the actual supply of gloves hence, competition has not been impacted. However, healthy competition is always welcome as it is good for the industry. It prevents existing players from resting on their laurels and provides the impetus for businesses to constantly improve by focusing on R&D, technological advancements and innovation to enhance quality, consistency, reliability and cost efficiency. This in turn, benefits our customers. In any case, we believe that as we continue to single-mindedly pursue our business direction of producing high quality gloves at an efficient low cost, we will still enjoy steady growth.
Q: What could be added value products made from rubber that could give your company a special sales proposition?
A: Top Glove’s focus will remain on its core business and area of strength, which is the manufacturing and sales of natural rubber and synthetic gloves, as the prospects for the glove industry are still very promising. However, through intensive R&D in the areas of quality, consistency, reliability and cost efficiency, we will continue to value add on our existing range of gloves and innovate new types of gloves as well.
Q: Where do you currently see the highest demand and the highest growth rates for rubber gloves?
A: We expect the highest growth rates to come from emerging markets where usage is relatively low but growing rapidly, owing to rising levels of awareness and healthcare standards. With favourable synthetic raw material prices and the continuing switching momentum from natural to nitrile glove, we see nitrile gloves presenting the greatest growth opportunities from both the emerging as well as developed economies.
Q: What will 2013-15 bring for Top Glove in terms of regional expansion ahead of the ASEAN Economic Community?
A: Regionally, we will focus on developing green field rubber plantation land in Sumatera, Indonesia where we have committed an investment of RM450 million spread over 13 years. This will help secure a consistent future supply of latex and also mitigate price volatility of natural rubber latex. We are also looking to further expand our existing operations in Thailand, as it offers better tax incentives and a more favourable corporate tax rate of 20 per cent.
Q: Latex prices are at their lowest in three years. What do you predict for the near future in terms of raw material prices?
A: In the near term, we expect latex prices to continue to trend at current levels in light of the ongoing Eurozone debt crisis and lackluster growth in rubber consuming economies such as the US, India and China. Further, there is also an increase in supply stemming from new planting done in 2005.
Q: What is Top Glove’s approach to recycling of rubber gloves to avoid latex waste?
A: At Top Glove, we do not recycle rubber gloves as we need to maintain a high level of product hygiene for our customers and end-users. Given its low-cost base, our disposable rubber gloves are meant for one-time use only, on hygiene grounds as well as to prevent contamination. However, latex wastage is strictly monitored at the production level via extensive R&D initiatives and production control parameters.
