Top Glove Corporation Bhd Corporate presentation

Top Glove Corporation Bhd

Corporate presentation

Bursa Malaysia 7113 Reuters TPGC.KL Bloomberg TOPG MK ADR CUSIP 890534100

T h e W o r l d ’ s L a r g e s t R u b be r G l o v e Ma n u f a c t u r e r

To p G l o v e , To p Q u a l i t y,

To p E f f i c i e n c y,

G o o d H e a l t h , S a f e t y F i r s t ,

B e H o n e s t

Presented by : Lim CG

Prepared by: See SF

Date: 3 January 2013

At a glance

• Commenced operations in 1991.

Listed in 2001

• Comprehensive product range

with 13 major types of rubber

gloves

• 80% of production for health care

sector and 20% for non-health

care sector

• Produce 77% natural rubber glove

and 23% synthetic rubber glove

• Target balance capacity mix of

natural rubber and synthetic

rubber glove

Page 2 / 21

1QFY13 product mix by volume

Powdered latex 52%

Powder free

latex 23%

Nitrile 16%

Vinyl 7%

Surgical 2%

Strong growth momentumEstimate Global annual demand: Approx. 160 bil pcs p.a for year 2012

No. of glo

ves (b

illion p

cs)

Year

Top Glove exponential growth in capacity (CAGR : 28%)

Expansion in global market share

Current market share Target market share by Dec 2015Page 3 / 21

1.4 2.4 3.25.1

7.29

15

22

28.23031.5

3335.25

4040.3

0

5

10

15

20

25

30

35

40

45

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 13

25%

0

20

40

60

80

100

120

140

160

180

'99'00'01'02'03'04'05'06'07'08'09'10'11'12

No. of glo

ves (b

illion p

cs)

Year

As at Jan’13

Global rubber glove usage(by region, 2000 – 2009)

USAEU27

Asia Ex Japan

Latin America

Japan

11%

89%32%

% of global glove usagein 2009

% of world populationin 2009

* Source from Malaysian Rubber Export Promotion Council and Company

%

Page 4 / 21

68%

• USA and EU27 with only 11% of world population consumed 68% of

global glove usage.

• Other regions with 89% of world population consumed only 32% of

global glove usage.

Geographically diversified

• Exports to 185 countries with

more than 1,800 customers

• Geographically diversified and

no single biggest customer

constitutes more than 4% of

revenue

• Customers are mainly

distributors in the respective

countries

• Preferred OEM manufacturer

Page 5 / 21

Europe 35%

North America 27%

Latin America 20%

Asia 10%

Middle East 5%

Rest of the World 3%

1QFY13 revenue by geography

1. Medical gloves is a necessity in

healthcare industry

� As a barrier of protection

2. Increasing healthcare and hygiene

awareness

� Especially in developing countries

3. Ageing population

� As elderly are more susceptible to

higher risk diseases

4. Health regulations

� Healthcare reforms, eg. US, China

� Healthcare regulations eg. OSHA in US,

EU-OSHA in Europe, SESI in Brazil

5. Emergence of health threats

� E.g. A(H1N1), SARS, bird flu, Bio-

terrorism threats, Anthrax

Key industry drivers

Page 6 / 21

24 manufacturing facilities across 3 countries(as at Jan 2013)

• 22 glove factories 40.3 bil capacity p.a.

from 462 production

lines

• 2 latex concentrate/ processing plants supply 60% to 70% of

Top Glove’s

requirement

China

2 glove factories

Produce:

• Vinyl glove

• PE glove

Thailand

2 glove factories2 latex plants

Produce:

• Latex examination

glove

• Latex concentrate

Malaysia

17 glove factories

Produce:

• Latex examination

glove

• Nitrile examination

glove

• Surgical glove

• Household glove

• Cleanroom glove

Page 7 / 21

Production capacity expansion plan

No. of production

lines

Capacity p.a. Target completion

Current: 22 glove factories 462 lines 40.3 bil pcs p.a.

Expansion plan :

F18 (Banting, Malaysia) Phase 2

F25 (Klang, Malaysia) New factory

F23 (Ipoh, Malaysia) Phase 2

Total expansion by August 2013

16 lines

20 lines

16 lines

52 lines

1.5 bil pcs p.a.

1.8 bil pcs p.a.

1.5 bil pcs p.a.

4.8 bil pcs p.a.

April 2013

June 2013

August 2013

Total by August 2013 : 23 glove factories 514 lines 45.1 bil pcs p.a.

Page 8 / 21

New Venture : Rubber Plantation

Page 9 / 21

1. Acquisition of PT Agro completed on 1 October

2012.

2. Plantation land located in Indonesia, south of

Sumatera.

3. Land size 30,773 ha.

4. Concessions land tenure for 60 years, renewal

for another 60 years.

5. Rubber trees has 6 years gestation period.

6. Progressive planting over 8 years, with full

development will take 13 years.

7. Estimated investment cost around RM450m,

over 13 years, including land, planting,

maintenance cost up to maturity and facilities.

Natural Rubber Supply vs Demand

Page 10 / 21

Costs breakdown

Average latex prices

2

3

4

5

6

7

8

9

10

11

12

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

Sep-12

RM p

er kg

FY05

RM3.28

FY07

RM4.78

FY06

RM4.94

FY04

RM3.14

FY08

RM5.62

FY09

RM4.34

RM7.20

(03/07/08)

RM6.85

(30/06/06)

RM7.75

(23/04/10)

FY10

RM6.12

RM10.99

(11/04/11)

FY11

RM8.92

• Able to pass majority of latex cost increases to customers

• On-going internal cost improvement and efficiency measures offset cost increases

• Upstream production (latex concentrate plant) to provide greater control over latex supply

Page 11 / 21

Latex 54%

Labour 9%

Chemical 9%

Fuel 8%

Packaging 6%

Overhead and

others 14%

Breakdown of production costs (from Sept'12 to Nov'12)

FY12

RM7.36

RM6.45

(10/10/12)

RM6.09

(02/01/12)

1QFY13

Natural rubber (NR) latex, nitrile latex & crude oil price trend (in USD)

Page 12 / 21

1.86

1.00

2.19

1.00

2.37

3.61

2.07

2.05

1.91

2.39

1.19

2.91

2.20

1.851.69

74.40

140

41.68

86.15

112.79

82.92

99.74

103.02

78.4

86.11

89.03

0

20

40

60

80

100

120

140

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

Jun

-05

Se

p-0

5

De

c-0

5

Ma

r-0

6

Jun

-06

Se

p-0

6

De

c-0

6

Ma

r-0

7

Jun

-07

Se

p-0

7

De

c-0

7

Ma

r-0

8

Jun

-08

Se

p-0

8

De

c-0

8

Ma

r-0

9

Jun

-09

Se

p-0

9

De

c-0

9

Ma

r-1

0

Jun

-10

Se

p-1

0

De

c-1

0

Ma

r-1

1

Jun

-11

Se

p-1

1

De

c-1

1

Ma

r-1

2

Jun

-12

Se

p-1

2

De

c-1

2

Crude Oil Price (WTI)

(USD/bbl)

NR Latex & Nitrile Price

(USD/KG)

Natural Rubber (NR) Latex, Nitrile Latex

& Crude Oil Price in USD

(Jan 2005 to Dec 2012)

Crude

Oil

NR

Latex

Nitrile

Note: NR Latex & Nitrile Latex based on 60% TSC

Challenges in glove industry

$

2

3

4

5

6

7

8

9

10

11

Aug-03

Feb-04

Aug-04

Feb-05

Aug-05

Feb-06

Aug-06

Feb-07

Aug-07

Feb-08

Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

• Due to weather impact, crude oil

price movement, speculation,

competition with other usage

• Time lag in passing on to customers

when prices move up sharply

• Majority sales in USD,

subject to USD currency

movement

• Time lag in passing on to

customers when USD

weakens sharply

• Impact on energy cost, other

raw materials and logistic cost

• Inflation

Page 13 / 21

Currency exposure

Raw material price fluctuation Crude oil price fluctuation/ speculation

3 months performance comparison

1Q13

1 Sept 12 –

30 Nov12

1Q12

1 Sept 11 –

30 Nov 11

Variance(1Q13 vs

1Q12)

4Q12

1 Jun 12 –

31 Aug 12

Variance(1Q13 vs

4Q12)

Total sales (RM’mil) 584.6 554.8 5% 607.3 (4%)

EBITDA (RM’mil) 89.6 58.2 54% 85.0 5%

EBITDA margin 15.3% 10.5% 14.0%

PBT (RM’mil) 70.4 41.6 69% 66.6 6%

PBT margin 12.0% 7.5% 11.0%

Profit attributable to equity

(RM’mil)57.5 31.4 83% 64.0 (10%)

PAT (RM’mil) 58.9 32.5 81% 65.8 (10%)

PAT margin 10.1% 5.9% 10.8%

EPS (sen) 9.3 5.1 82% 10.3 (10%)

• Sales volume (quantity of gloves) up 23% 1Q13 vs 1Q12, up 6% 1Q13 vs 4Q12

• Latex price down 30% 1Q13 vs 1Q12, down 14% 1Q13 vs 4Q12

• Improvement in margin

• Lower tax expense due to recognition of deferred tax assets

Page 14 / 21

Financial highlights since listing in 2001 (12 years)

Incomestatement

Per share data

* Based on par value of RM0.50, adjusted for share split and bonus issue

# Restated to comply with FRS112 (deferred tax)

Page 15 / 21

(in RM’mil) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CAGR12 yrs

Avg

Sales 138.9 180.2 265.1 418.1 641.8 992.6 1,228.9 1,377.9 1,529.1 2,079.4 2,053.9 2,314.4 31% -

EBITDA 23.9 27.1 39.5 60.6 89.2 130.3 175.7 197.8 287.5 364.7 207.3 310.0 30% -

EBITDA margin 17.2% 15.0% 14.9% 14.5% 13.9% 13.1% 14.3% 14.4% 18.8% 17.5% 10.1% 13.4% - 14.8%

PBT 17.2 20.2 29.3 45.2 65.7 91.8 118.6 134.6 222.0 305.0 145.5 240.7 33% -

PBT margin 12.4% 11.2% 11.0% 10.8% 10.2% 9.2% 9.7% 9.8% 14.5% 14.7% 7.1% 10.4% - 10.9%

# PAT Equity 15.9 18.1 25.3 39.5 58.1 84.1 89.6 110.1 169.1 245.2 113.1 202.7 32% -

PAT margin 11.4% 9.9% 9.7% 9.5% 9.1% 8.5% 7.2% 7.8% 11.0% 12.0% 5.6% 8.9% - 9.2%

ROE 17.0 16.1 17.8 24.3 26.9 27.8 14.0 16.0 20.0 22.0 9.9 15.8 - -

(in RM) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CAGR

* Net Assets 0.183 0.221 0.275 0.312 0.409 0.561 1.067 1.141 1.393 1.808 1.853 2.068 26% -

* EPS 0.03 0.04 0.05 0.08 0.11 0.16 0.16 0.19 0.29 0.40 0.18 0.33 30% -

Strong and healthy balance sheet

Page 16 / 21

1QFY13

As at 30 Nov 12

FY2012

As at 31 Aug 12

Net cash flow from operating activities (RM’mil) 113.3 277.9

Capital expenditure and investment (RM’mil) 80.4 145.6

Free cash flow before dividend (RM’mil) 32.9 132.3

Net cash and short term investment (RM’mil) 345.9 308.5

Shareholders equity (RM’mil) 1,345.1 1,279.9

Net assets per share (RM) 2.17 2.07

Return on equity * 17.1 15.8

Inventory turnover days 29 28

Receivable turnover days 40 44

Payable turnover days 38 37

* Annualised

Dividend – sustainable and steady growthFinancial

year

Dividend per share

(sen)

Total

dividend

(RM’000)

2012 9.00 (Proposed)

7.00 (interim)

55,699

43,306

2011 11.00 68,035

2010 16.00 98,877

2009 11.00 65,873

2008 5.50 32,389

2007 4.61 27,435

2006 3.67 21,173

2005 2.66 14,110

2004 2.36 12,295

2003 1.85 9,550

2002 0.56 2,808

2001 0.80 4,000

Total payout since listing 455,550

* Dividend per share has been adjusted for share split and bonus issue

Target dividend payout ratio is around 50% of profit

attributable to equity

Dividend payout ratio : FY12 at 50%

: FY11 at 60%

: FY10 at 40%

: FY09 at 40%Page 17 / 21

0.80 0.56

1.85 2.36

2.66 3.67

4.61 5.50

11.00

16.00

-

2

4

6

8

10

12

14

16

18

20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Dividend per share (sen)

Financial Year

Dividend (sen)(Financial year ended 31 August)

16.00

11.0

0

Return on investment

Page 18 / 21

DateClosing share price (RM)

Number of shares held

Total market value (RM)

Accumulated dividend

received (RM)

Cost of investment

(RM)

Capital appreciation

(RM)

Total s/holders return %

27-Mar-01 2.70 (IPO) 1,000 2,700 - 2,700 - -

02-Jan-04 4.90 1,820 * 8,918 209 2,700 6,427 238%

03-Jan-05 8.65 1,820 * 15,743 415 2,700 13,458 498%

03-Jan-06 6.80 3,640 * 24,752 673 2,700 22,725 842%

03-Jan-07 13.80 3,640 * 50,232 962 2,700 48,494 1796%

03-Jan-08 6.50 5,096 * 33,124 1,412 2,700 31,836 1179%

02-Jan-09 3.64 5,096 * 18,549 1,933 2,700 17,782 659%

04-Jan-10 10.06 5,096 * 51,266 2,595 2,700 51,161 1895%

03-Jan-11 5.05 10,192 * 51,470 4,073 2,700 52,842 1957%

03-Jan-12 5.12 10,192 * 52,183 5,500 2,700 54,983 2036%

02 Jan-13 5.75 10,192 * 58,604 6,830 2,700 62,734 2323%

2323% since IPO in Mar’01, assuming initial investment of 1,000 shares was made during initial public offering price of RM2.70 on 27/03/01

* Adjusted for bonus issue and share split

If the bonus issues and share split are not taken into consideration, the share price should be RM5.75 x 1.3 x 1.4 x 1.4 x 2 x 2 = RM58.60 per share

Corporate culture

Must know, Must do, Must teach

Business direction

1. To produce consistently high

quality gloves at efficient low cost.

Investment direction

1. To earn 2 healthy dollars and invest 1

efficient dollar.

Business rules

1. Do not lose our shareholders’ money;

2. Do not lose our health;

3. Do not lose our temper;

4. Do not lose our customers.

Business philosophies

1. We work for our customers;

2. We take care of the interest of our

shareholders;

3. We ensure that our employees continue

to contribute positively to the company

and we care for their well-being; and

4. We work closely with our bankers,

suppliers, business associates and friends.

Business ethics

1. Honesty

2. Integrity

3. Transparency

Page 19 / 21

Business Direction, Ethics, Rules & Philosophies

Management focus going forward

Page 20 / 21

• Further automate production line to reduce

workers & improve the efficiency

• Target balance capacity mix of natural

rubber and synthetic rubber glove

• Move upstream to rubber plantation

• Capture growth in emerging market demand

• Target 30% global market share

Thank youQ & A Session

Top Glove Corporation Berhad

www.topglove.com.my

[email protected]

+603 5022 2110

Page 21 / 21