TOP GLOVE: Ambitions Firmly in Hand as Demand Grows

This article, written by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange), originally was published on 24 June 2016 on SGX My Gateway kopi-C. The article is republished here with permission.

Last year, Top Glove launched nitrile surgical gloves with specialised functions that include anatomical design to reduce hand fatigue. (Photo: Company) Malaysian entrepreneur Tan Sri Dr Lim Wee Chai made his first foray into the business world by selling air-conditioners at the age of 24. Three years later, the Bachelor of Science graduate with Honours in Physics from University Malaya upgraded himself with a Master of Business Administration from Sul Ross State University in Texas. "I learnt a lot selling air-cons in those early years, and the MBA helped me understand how to manage a business," recalled Lim, whose youthful appearance belies his 58 years.   It was like running a marathon. Every day, we looked for areas to improve on - from sales and marketing to technical knowledge. That was how we built the company from scratch. - Tan Sri Dr Lim Wee Chai Executive Chairman Top Glove Corporation Bhd (Photo: Company) Those marketing skills, coupled with his physics know-how, inspired Lim in 1991 to set up Top Glove Corporation Bhd with his wife Tong Siew Bee. "My wife and I wanted to start a business together," said Lim, who went on to obtain his PhD in Management from University of Selangor last year. Last month, he was also conferred an Honorary Doctorate in Business Administration by Oklahoma City University in the US. "Medical gloves commanded good margins, and the healthcare sector was showing strong growth. We decided glove manufacturing was the right industry for us." At the time, the company had one factory and three production lines. "We started with very little capital, and we were the smallest player in the sector," Lim said. "It was like running a marathon. Every day, we looked for areas to improve on - from sales and marketing to technical knowledge. That was how we built the company from scratch." Today, Top Glove is the world's largest rubber glove manufacturer with a 25% global market share. It has a total of 25 glove factories in Malaysia, Thailand and China, with 484 production lines and an output of 45 billion pieces per annum. It also owns two latex processing plants in Thailand that supply 60%-70% of its latex needs.

Sustained Resilience

Listed on Bursa Malaysia in March 2001, Top Glove has a market capitalisation of 6.3 billion ringgit (S$2.1 billlion). Its shares have generated a total return of 45.3% in the last 12 months.

Over the past 15 years, the glove maker has expanded its revenue and profit after tax by a compound annual growth rate (CAGR) of 25% and 29% respectively. Lim and his family own about 38% of the company.

Top Glove will kick off its secondary listing on Singapore Exchange next Tuesday. As no new shares will be issued, Lim and his associates have pledged to sell at least S$20 million of existing Top Glove shares over the next 12 months to create liquidity and trading activity on SGX.

The Group's cleanroom gloves provide protection from contamination. (Photo: Company)
Competitors listed on Bursa Malaysia include Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, and Supermax Corp. Top Glove's Singapore-listed peers include Riverstone Holdings Ltd and UG Healthcare Ltd. It also competes with Vienna-listed Semperit AG, Europe's largest maker of medical rubber gloves, as well as ASX-listed Ansell Ltd and NYSE-listed Kimberly-Clark Corp.

Lim, who has served as Top Glove's Executive Chairman since 2000, expects steady growth of 6% to 8% per annum in global glove demand.

"With rising standards of living, improving standards of health, and increasing life expectancy, demand for gloves will remain resilient," he added.

But competitive pressures are also increasing in tandem with higher sales, Lim admitted. To maintain its edge in the industry, Top Glove aims to continue producing high quality gloves at lower cost.

"Any business with strong demand will invite competition, and new players are increasing all the time. When supply outstrips demand, our margins will get hit, so our priority is to control costs and boost production efficiency," he added.

As a result, the company intends to automate as many of its manufacturing processes as possible. "Every year, automation costs are falling, while labour costs are rising. Robotic systems allow us to produce gloves with better and more consistent quality, as well as reduce wastage," Lim said.

The company is also beefing up its research and development investments, and plans to double the number of R&D staff this year to 100. It has filed 20 patents in Malaysia over the last two years - two have been granted, while the rest are pending.

The patents awarded are for products catering to the market's increasingly stringent and specialised requirements, such as flexibility and strength, as well as manufacturing technologies that raise output rates for dipping of gloves.

"We try to introduce new products or features every year to keep abreast of the competition. Without R&D, there's no improvement in quality, and without improvement, there's no future for Top Glove," Lim said.

Stark Simplicity

Other values Lim holds dear to his heart are encapsulated in Top Glove's business principles. The rules are starkly simple: Do not lose our temper, do not lose our health, do not lose our shareholders' money, do not lose our customers.

"Again, it's all about discipline and self-control. If we lose our temper, we're likely to make mistakes or bad decisions, so getting angry is not good," Lim said.

"As managers and leaders, we make many decisions. If we make mistakes often, it will cost the company money, and could even result in the loss of lives in the factory."

To motivate staff, Top Glove has composed a corporate anthem, taking a leaf from the playbooks of multinationals like Symantec, Ernst & Young and KPMG.

Its perky, 15-year-old jingle comes in four languages - English, Bahasa Malaysia, Mandarin and Thai - and is set to an energetic beat. The lyrics emphasise the quality, reliability and consistency of Top Glove's products.

The goal? To build team spirit and branding.

"Our corporate song helps us develop a positive attitude, and if we're positive, we're more likely to get good results, and be able to solve more problems," Lim grinned, flashing his trademark thumbs-up gesture.

Lim's indefatigable optimism and drive is evident in Top Glove's ambitions - it has set its sights on becoming the world's largest nitrile glove manufacturer.

Nitrile, a synthetic rubber, is safe for those allergic to latex. It is also resistant to a wide range of chemicals, and is the most durable form of disposable gloves on the market.

"Market demand for nitrile gloves is increasing, mainly from the healthcare sector and developed markets, such as US, Europe and Japan," he said.

"We are looking at ways to improve the manufacturing and costing process of our nitrile gloves."

The company will continue to pursue organic growth, as well as suitable merger and acquisition opportunities.

Its expansion plans involve adding 16 nitrile lines in Port Dickson, Malaysia, 12 natural rubber lines in Phuket, Thailand, and a new nitrile glove factory with 28 lines in Klang, Malaysia. This will boost annual output to 52.4 billion gloves by February next year.

The hunt for M&A deals is centred on the ASEAN markets, in particular, Malaysia. Given the company's expertise in rubber products, Southeast Asia is a natural focus, as the commodity is sourced mostly from the region, Lim said.

Companies producing healthcare-related rubber products, such as catheters, condoms, non-disposable industrial gloves, and hand moulds could be potential targets.

Criteria for evaluating a deal include profitability, size and location of the business, types of gloves produced, as well as whether it owns cutting-edge technologies.

By 2020, the company aims to raise its share of the global glove market to 30% from the current 25%.

That could be a challenging target, Lim admitted. "But in business and in life, we must always set a target, and work towards it."

"For myself, I have set a personal target to live to a hundred - that's why it's so important to stay fit and healthy, every day!"

Source: Company data

Top Glove Corporation Bhd

Top Glove is the world's largest natural rubber glove manufacturer, owning and operating 27 manufacturing facilities with 484 production lines and a capacity of approximately 45 billion gloves per annum. The Malaysia-based company produces latex and synthetic nitrile gloves for health care providers and manufacturers, as well as households. It is also a component stock of the FTSE Bursa Malaysia ("FBM") Mid 70 Index, FBM Top 100 Index, FBM Emas Index, FBM Emas Syariah Index, FTSE Bursa Malaysia Hijrah Shariah Index and FTSE4Good Bursa Malaysia Index.

For financial results for the 3rd quarter ended 31 May 2016, click here.

The company website is: http://www.topglove.com.my