A ban on U.S. imports bursts into the Top Glove bubble


Top Glove was able to exploit 12 strong or tumultuous months when the world’s largest rubber glove maker was named Asia’s best employer by a magazine for the fifth year in March.

Shares in the Malaysian manufacturer of personal protective equipment had grown more than 500 percent since reports of new coronaviruses emerged in China a year earlier.

However, the stock price was hit by the approval of vaccines in late 2020. Then, on the eve of the March award, U.S. Customs and Border Protection he ordered the seizure of Top Glove products on arrival in U.S. ports over allegations that the company used forced labor.

U.S. prosecutors have taken the luster of the fortune of one of the world’s largest pandemic corporate beneficiaries. So rapid was the rise of the company in the early days of Covid-19, that Lim Wee Chai, Founder and chair of Top Glove, has seen its fortunes swell nearly threefold in the 12 months to April to $ 3.5 billion, according to Forbes, making him the eighth richest person in Malaysia.

Today, outside the U.S. confiscation order, the company’s prospects are clouded by the rapid spread of vaccines in developed markets, potentially reducing demand for Top Glove products, and increasing competition from Chinese producers. at low cost.

Top Glove last week reported a 22 percent quarterly drop in sales to RM4.16 billion ($ 1.01 billion), even though it was still growing 147 percent year over year. The company attributed weaker gains in the third quarter to an increase in latex prices and a 16 percent drop in the average selling price of gloves.

“From all angles there will always be a correction,” Top Glove CEO Lee Kim Meow told the Financial Times.

The company also said that the drop in revenues in the third quarter was due to the U.S. ban. Sales volume in North America – the largest Top Glove market that pays the highest prices for its gloves – fell 68 percent in the third quarter.

Ng Chi Hoong, an analyst at Affin Hwang Capital in Malaysia, said the group had to lower its prices to attract buyers in new markets. Top Glove “has been forced to look for new ways to compensate for the gap left by the American market.”

Lim Wee Chai,

Lim Wee Chai, founder and chair of Top Glove, saw his fortune increase almost threefold in the 12 months to April to $ 3.5 billion as the coronavirus increased demand for rubber gloves © Kiyoshi Ota / Bloomberg

The U.S. order, which highlights allegations of forced labor that have been linked to Malaysia’s glove industry for years, also delayed a proposal by the company to keep a $ 1 billion list. in Hong Kong by “a few more months,” Top Glove’s Lim said in a earnings call.

The company had addressed Customs and Border Protection issues and was waiting “only” for the agency to verify Top Glove’s payment and repair practices, he said. The U.S. agency told the Financial Times that it was in negotiations with Top Glove, adding that these types of orders were lifted only when there was evidence that forced labor was no longer used.

The U.S. import ban came after a Top Glove employee died of Covid-19 last year as a fire spread to the company’s factories and workers ’dormitories, which Malaysian authorities at the time described as cluttered, inconvenient and lacking adequate ventilation. The fire has since been contained.


Top Glove, which hosts nearly 12,000 foreign workers in Malaysia, said it is investing RM200m in additional dormitories for the 14,200 staff. Conditions in their hostels met or exceeded the requirements of a new Malaysian workers ’accommodation law that went into effect last year, he said.

Norges Bank Investment Management, which oversees Norway’s $ 1.3 billion oil fund, voted in January against the election of several directors at its annual Top Glove meeting. The fund, which has a 0.89% stake in Top Glove worth $ 109 million, declined to comment.

The bar graph of sales volume by geography (%) showing the prohibition of U.S. costs squeezing Top Glove sales in North America

When asked about the vote, Lee said institutional investors “were probably not so comfortable” with “what happened last year,” adding that the company is working to improve engagement with shareholders.

Top Glove’s Lim said the U.S. ban was “temporary” but analysts don’t see it being lifted until the end of the year.

“Even though [Top Glove] leaders who have rectified all the indicators from the International Labor Organization, we only expect the ban to be lifted by the end of 2021, ”said Ng of Affin Hwang Capital.

Patrick Stokvis, vice president of research firm Third Bridge, said in a report that the examination of Top Glove’s work practices “will continue to push costs across all rubber glove manufacturers in Malaysia”. This could erode its cost advantages over Chinese competitors.

Lee of Top Glove, however, predicted that demand for its products will remain strong as countries stockpile gloves in anticipation of future health crises.

Supramaniam Shanmugam, president of the Malaysian Association of Rubber Glove Manufacturers, said glove consumption will not go away because of the vaccines. The pandemic, like the 2003 Sars fire, will stimulate long-term demand for protective tools, he added.

The association estimates that global demand in 2021 will grow from 18-27 per cent to 420 billion gloves, with Malaysia producing about two-thirds of them.

While Top Glove appears to have dealt with allegations of forced labor, analysts believe, the U.S. ban needed to be lifted to calm investors ’concerns.

“What we’ve done in the past isn’t good enough,” admits Lee of Top Glove.

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