Top Glove to raise prices, cites higher labour cost

KUALA LUMPUR: Top Glove Corp Bhd will raise glove prices by up to five per cent, following the minimum wage law to maintain profits.

Currently, Top Glove’s factories in Malaysia employ some 9,000 workers.

As the minimum wages law took effect on January 1 2013, group chairman Tan Sri Lim Wee Chai expects labour cost to jump by 50 per cent.

“A typical foreign worker doing overtime is already earning RM1,200 per month. With the mandatory minimum wage of RM900, the salary will now be RM1,800.

“We need to protect our shareholders’ interest. So, we’ll pass on the higher labour cost. Glove prices, which are averaging at US$27 (RM ) per 1,000 pieces, will have to go up around three to five per cent,” he told stock analysts and journalists at a briefing in Kuala Lumpur yesterday.

Top Glove’s share price movement is keenly matched by its rivals as it is the world’s biggest glovemaker capable of churning out 40 billion pieces and commanding 30 per cent of the global market share.

Two months ago, Gas Malaysia Bhd, in view of supply agreements with its clients expiring end of 2012, proposed 2013 contracts to include a “take or pay” clause with daily minimum and maximum surcharges on excess gas usage.

Many factories, which are reliant on natural gas, appealed against the move.

Asked if Top Glove has signed a new gas supply agreement with Gas Malaysia, Lim said: “We’re still talking. Gas Malaysia’s supply terms are grossly unfair, not practical and very one-sided”.

On whether Top Glove is prepared to pay more for gas usage, he noted that the next scheduled price hikes for natural gas and electricity are set to be in July 2013.

In its filing to the stock exchange yesterday, Top Glove said its profits for its first quarter ended November 2012 jumped 82 per cent to RM58.9 million, thanks to cheaper latex and better cost savings at its factories.

The profit jump was achieved on the back of five per cent revenue growth to RM584.6 million from RM554.8 million a year ago.