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  • 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

    Raw material price fluctuation Crude oil price fluctuation/

    speculation

  • Quarterly performance comparison

    1Q14

    1 Sep 13

    30 Nov 13

    4Q13

    1 Jun 13

    31 Aug 13

    Variance

    (1Q14 vs

    4Q13)

    1Q13

    1 Sep 12

    30 Nov 12

    Variance

    (1Q14 vs

    1Q13)

    Total sales (RMmil) 574.0 548.2 5% 584.6 (2%)

    EBITDA (RMmil) 84.4 87.6 (4%) 89.6 (6%)

    EBITDA margin 14.7% 16.0% 15.3%

    PBT (RMmil) 61.8 67.1 (8%) 70.4 (12%)

    PBT margin 10.8% 12.2% 12.0%

    PAT (RMmil) 511.9 2% 58.9 (12%)

    PAT margin 9.0% 9.3% 10.1%

    Profit attributable to equity

    (RMmil) 50.3 48.4 4% 57.5 (13%)

    EPS (sen) 8.1 7.8 4% 9.3 (13%)

    51.9 51.1

    Page 13 / 20

    Sales quantity up 10% 1QFY14 vs 1QFY13, up 3% 1QFY14 vs 4QFY13

    1QFY14 performance was affected by China operation which incurred RM5.2m loss

    (4QFY13: RM1.3m loss, 1QFY13: RM0.3m gain)

    Included in1QFY13 was fair value gain on forex contract of RM15.2m and loss of

    RM8.4m in 4QFY13.

  • Financial highlights since listing in 2001 (13 years)

    Incom

    e s

    tate

    ment

    Per

    share

    data

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

    # Restated to comply with FRS112 (deferred tax)

    (in RMmil) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CAGR 13 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 2,313.2 28% -

    EBITDA 23.9 27.1 39.5 60.6 89.2 130.3 175.7 197.8 287.5 364.7 207.3 310.0 323.3 28% -

    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% 14.0% - 14.7%

    PBT 17.2 20.2 29.3 45.2 65.7 91.8 118.6 134.6 222.0 305.0 145.5 240.7 242.2 30% -

    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% 10.5% - 10.9%

    PAT 15.9 18.0 25.7 39.9 58.2 84.8 88.7 108.1 168.1 250.4 115.1 207.3 202.8

    PAT margin 11.4% 10.0% 9.7% 9.5% 9.1% 8.5% 7.2% 7.8% 11.0% 12.0% 5.6% 9.0% 8.8% - 9.2%

    # PAT Equity 15.9 18.1 25.3 39.5 58.1 84.1 89.6 110.1 169.1 245.2 113.1 202.7 196.5 29% -

    ROE 17.0 16.1 17.8 24.3 26.9 27.8 14.0 15.7 19.9 22.4 10.0 16.2 14.9 - -

    (in RM) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 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 2.189 27% -

    * 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 0.32 27% -

    Page 14 / 20

  • 15

    For period ending

    3 Months

    30 Nov 13

    12 Months

    31 Aug 13

    Net cash flow from operating activities (RMmil)

    Capital expenditure and acquisition (RMmil)

    Free cash flow before dividend (RMmil)

    53.8

    25.8

    28.0

    259.7

    315.0

    (55.3)

    Strong and healthy balance sheet

    * Annualised

    As at

    Q1FY14

    30 Nov 13

    FY2013

    31 Aug 13

    Net cash and short term investment (RMmil)

    Shareholders equity (RMmil)

    Net assets per share (RM)

    Return on equity *

    Inventory turnover days

    Receivable turnover days

    Payable turnover days

    187.8

    1,431.2

    2.31

    14.5

    34

    46

    35

    158.4

    1,357.8

    2.19

    14.9

    37

    49

    39

    Page 15 / 20

  • Dividend sustainable and steady growth

    * 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 : FY13 at 50%

    : FY12 at 50%

    : FY11 at 60%

    : FY10 at 40%

    : FY09 at 40% Page 16 / 20

    Financial

    year

    Dividend per share

    (sen)

    Total

    dividend

    (RM000)

    2013 9.00 (proposed final)

    7.00 (Interim)

    55,838

    43,404

    2012 16.00 99,038

    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 554,825

    0.80 0.56

    1.85 2.36

    2.66 3.67

    4.61 5.50

    11.00

    16.00

    11.00

    16.00 16.00

    -

    2

    4

    6

    8

    10

    12

    14

    16

    18

    20

    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

    Div

    ide

    nd

    per

    sh

    are

    (se

    n)

    Financial Year

    Dividend (sen) (Financial year ended 31 August)

  • 17

    Date Closing 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%

    03-Jan-13 5.68 10,192 * 57,891 6,830 2,700 62,021 2297%

    03-Jan-14 5.73 10,192 * 58,400 8,460 2,700 64,160 2376%

    04-Feb-14 5.41 10,192 * 55,139 9,378 2,700 61,817 2290%

    Return on investment

    2290% since IPO in Mar01, 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

    RM5.41 x 1.3 x 1.4 x 1.4 x 2 x 2 = RM55.14 per share

    Page 17 / 20

  • 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 18 / 20

    Business Direction, Ethics, Rules & Philosophies

  • 19

    Management focus going forward

    Page 19 / 20

    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 you Q & A Session

    Top Glove Corporation Berhad

    www.topglove.com.my

    [email protected]

    +603 5022 2110

    Page 20 / 20