tg 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 b e r G l o v e M a 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 : CG Lim

Prepared by: See SF

Date: 04 February 2014

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 69% natural rubber glove

and 31% synthetic rubber glove

Target balance capacity mix of

natural rubber and synthetic

rubber glove

Page 2 / 20

Product mix by volume

1QFY14 (Sep13 to Nov13)

Powdered latex 47%

Powder free latex

21% Nitrile 24%

Vinyl 7%

Surgical 1%

Strong growth momentum Estimate Global annual demand:

Approx. 165 bil pcs p.a for year 2013

No.

of

glo

ves

(billion p

cs)

Year

Top Glove exponential growth in capacity

(CAGR : 26%)

Expansion in global market share

Current market share Target market share by Dec 2015 Page 3 / 20

1.4 2.4 3.2

5.1 7.2

9

15

22

28.2 30

31.5 33 35.25

40 43.9 41.3

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 '14

25%

0

50

100

150

200

'99 '01 '03 '05 '07 '09 '11 '13

No.

of

glo

ves

(billion p

cs)

Year

As at Jan14

Global rubber glove usage (by region, 2000 2009)

USA EU27

Asia Ex Japan

Latin America

Japan

11%

89% 32%

% of global

glove usage

in 2009

% of world

population

in 2009

* Source from Malaysian Rubber Export Promotion Council and Company

%

Page 4 / 20

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 195 countries with

more than 2,000 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 / 20

Europe 30%

North America

29%

Latin America

16%

Asia 15%

Middle East 7%

Rest of the World 3%

Revenue by geography

1QFY14 (Sep13 to Nov13)

6

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 / 20

7

25 manufacturing facilities across 3 countries (as at January 2014)

23 glove factories

41.3 bil capacity p.a.

from 464 production

lines

2 latex concentrate/

processing plants

supply 60% to 70% of

Top Gloves

requirement

China

1 glove factory

Produce:

Vinyl glove

PE glove

Thailand

2 glove factories

2 latex plants

Produce:

Latex examination

glove

Latex concentrate

Malaysia

20 glove factories

Produce:

Latex examination

glove

Nitrile examination

glove

Surgical glove

Household glove

Cleanroom glove

Page 7 / 20

8

Current expansion plan

No. of

production

lines

Capacity p.a. Target

completion

Current: 23 glove factories 464 lines 41.3 bil pcs p.a.

Expansion plan :

F27 (Lukut, Malaysia) Phase 2

F29 (Klang, Malaysia) New factory

Total expansion by August 2014

6 lines

14 lines

20 lines

0.6 bil pcs p.a.

1.4 bil pcs p.a.

2.0 bil pcs p.a.

May 2014

August 2014

Total by August 2014 : 24 glove factories 484 lines 43.3 bil pcs p.a.

Page 8 / 20

New Venture : Rubber Plantation

Page 9 / 20

1. Plantation land located in Indonesia, south

of Sumatera; Land size 30,772 ha

2. Concessions land tenure for 60 years,

renewal for another 60 years.

3. Purpose :

a) Target to supply around 40% of own

requirement

b) Reduce volatility of latex price impact

4. Preparation for planting commenced in Oct

2013.

5. With progressive planting over 8 years and a

gestation period of 7 years, full development

is expected within 14 years.

6. Estimated investment cost around RM450m

over 14 years period. Positive cash flow

expected from year 10.

10

Costs breakdown

Average latex prices

2

3

4

5

6

7

8

9

10

11

12

Jun-

05

Dec-

05

Jun-

06

Dec-

06

Jun-

07

Dec-

07

Jun-

08

Dec-

08

Jun-

09

Dec-

09

Jun-

10

Dec-

10

Jun-

11

Dec-

11

Jun-

12

Dec-

12

Jun-

13

Dec-

13

RM

per

kg

FY05

RM3.28

FY07

RM4.78

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

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

FY12

RM7.36

RM6.45

(10/10/12)

RM4.61

(04/02/14)

FY13

RM5.77

Latex 49%

Labour 11%

Chemical 9%

Fuel 8%

Packaging 6%

Overhead and

others 17%

Breakdown of production costs (1QFY14, Sep'13 to Nov'13)

RM10.99

(11/04/11)

FY06

RM4.94

Page 10 / 20

11

Natural rubber (NR) latex, nitrile latex &

crude oil price trend (in USD)

Page 11 / 20

1.86

1.00

2.19

1.00

2.37

3.61

2.07

2.05 2.02

1.38

2.39

1.19

2.91

2.20

1.85 1.71 1.49

74.40

140

41.68

86.15

112.79

82.92

99.74

103.02

78.4 97.53

107.76

96.56

0

20

40

60

80

100

120

140

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

Feb

-06

May

-06

Au

g-0

6

No

v-0

6

Feb

-07

May

-07

Au

g-0

7

No

v-0

7

Feb

-08

May

-08

Au

g-0

8

No

v-0

8

Feb

-09

May

-09

Au

g-0

9

No

v-0

9

Feb

-10

May

-10

Au

g-1

0

No

v-1

0

Feb

-11

May

-11

Au

g-1

1

No

v-11

Feb

-12

May

-12

Au

g-1

2

No

v-1

2

Feb

-13

May

-13

Au

g-1

3

No

v-1

3

Feb

-14

Crude Oil Price (WTI) (USD/bbl)

NR Latex & Nitrile Price (USD/KG)

Crude Oil

NR Latex

Nitrile

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

12

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 12 / 20

Currency exposure