Huh?

Yesterday I saw an announcement posted on Bursa Website: TOP GLOVE CORPORATION BERHAD (“the Company” or “Top Glove”) - Article entitled : Top Glove issues profit warning

• We refer to the article entitled “Top Glove issue profit warning” appearing in The Edge Financial Daily on Monday, 4 August 2008, page 1 and 4 and with reference to our reply to Bursa Malaysia Securities Berhad on 25 September 2007.
  
  The Company would like to clarify that the Company has not issued any Profit Warning Statement. The headline of the article published by The Edge was merely its own interpretation from the interview carried out on 29 July 2008.
  
  The Company is able to achieve a higher turnover in FY08 compared with last year, but lower than targeted turnover due to the weakening of US Dollar by around 8%.
  
  The targeted profit of FY08 was affected by the unexpected surge in raw material prices and the inflationary effect. In particular, the oil price which has gone up by around 65% and the latex price increased by around 45% compared with last year. Also, the recent revision in gas price of around 72% by the government also affected the profitability.
  
  However, the Company as always will endeavour to achieve better results than last year, with the commitment of the management team and with the continuous improvement of our glove quality and cost efficiency

The following is the link to the said article on The Financial Edge on Monday, 04-08-2008: Top Glove issues profit warning

• 04-08-2008: Top Glove issues profit warning
  
  KLANG: Top Glove Corporation Bhd, the world’s largest rubber glove maker, does not expect to meet its target of RM125 million net profit for its financial year ending Aug 31, 2008 (FY08), said executive director Lim Cheong Guan.
  
  For the nine months to May 31, 2008, the company’s net profit rose 11.6% to RM84.96 million from RM76.12 million a year earlier. Annualised, the profit for FY08 would be about RM113 million.
  
  “It is very difficult for us to get RM40 million net profit in one quarter, especially when the US dollar is weakening and (with the) several cautious steps we have taken amid the concerns on the uncertain market situation.
  
  “However, we will try our best,” Lim told The Edge Financial Daily in a recent interview. The company posted a 12-year-high net profit of RM103 million in FY07.
  
  Nevertheless, the company is targeting to pay a total dividend of 22%, or 11 sen per share, in FY08 against 20% or 10 sen per share in FY07. As of May, it had declared an interim dividend of 10%, or five sen per share.
  
  Similarly, Lim said the company is most likely to fall short of its targeted RM1.55 billion in sales revenue, expecting instead to reach RM1.4 billion. However, he believed that its performance in FY08 would still be better than that in FY07.
  
  Top Glove’s cumulative sales revenue for the nine months breached RM1 billion in FY08 compared with RM921.22 million a year earlier. It posted a record revenue of RM1.23 billion in FY07. The company controls 25% of the global rubber glove market.
  
  Analysts’ consensus forecast has Top Glove’s net profit at RM114.55 million for FY08. An analyst with a local bank expects Top Glove’s FY08 net profit to reach only RM112 million. “There is only one quarter left and I don’t think Top Glove can make RM40 million in this short period. Furthermore, its profit margin is under pressure following the higher raw material prices and weakening currency,” he said.
  
  “There is a possibility of the market slowing down, and it might have a slight impact on Top Glove. However, the company’s operations in China are doing well and have received high demand. It would contribute to their bottom line.”
  
  On the industry outlook, the analyst said he was concerned that demand would slow down. He believed that glove makers would be cautious of any capacity expansion and investment.
  
  In line with the uncertain market, Top Glove has reduced its capacity utilisation to 80% from more than 90% previously. However, Lim said the reduced capacity utilisation had not affected sales growth.
  
  “We are not as aggressive as last time. We are cautious about the market situation and have slowed down our production rate. Some factories are not fully operated,” Lim said. Top Glove has an annual production capacity of 30 billion pieces of gloves.
  
  “We are an original equipment manufacturer, and we produce gloves based on customers’ requirements. It is unlikely for us to see reduced demand, as gloves are a necessity in some industries,” Lim said.
  
  Top Glove exports its products to 180 countries, with the United States and Europe each contributing 30% to its revenue. Asia makes up 12%.
  
  “We see more business potential in Asia, especially India and China,” Lim said. About 80% of its gloves are sold to the medical industry.
  
  With some minor glove makers expected to cease operations during this difficult period, Lim sees it as an opportunity for Top Glove to get more business.
  
  In mitigating the escalating raw material prices, Top Glove has increased glove prices since May. Latex powdered gloves, which make up 52% of its total revenue, are currently sold at US$27 per 1,000 pieces, up from US$23 per 1,000 pieces in May.
  
  “We pass 100% of the cost of natural gas, electricity, fuel and chemicals to customers. For latex, we absorb 20% of the cost and pass the other 80% to the customers,” Lim said.
  
  He was confident that raising prices to retain profit margin would not dent its competitiveness against rivals in Thailand and Indonesia.
  
  “The cost of making gloves in Thailand and Indonesia is much higher than in Malaysia. For example, the natural gas price in Thailand is RM38 per mmBtu (million metric British thermal unit). Our gap (of cost) was reduced only after inflation, but their cost is still higher than us,” he added.
  
  Lim also dismissed suggestions that using biomass as fuel could be expensive, as manufacturers had to maintain boilers and also provide storage for biomass materials.
  
  “Before the increase in natural gas prices, the production cost of using either biomass or natural gas was similar. However, the government has raised the price of natural gas by 71% to RM22.06 per mmBtu from Aug 1.
  
  “After deducting the cost of storing biomass materials and maintaining the boilers, we could still save up to 70% compared to using natural gas,” Lim said, adding that Top Glove was using palm kernel shells, empty fruit bunches and wood chips to feed its boilers.
  
  The government had on June 4 announced that it would increase the selling price of natural gas by as much as 187% to RM32.56 mmBtu by July 1. However, it has deferred the full implementation and the price hike would be gradual over the next 10 years until they are on par with global prices.
  
  Lim noted that the cost of building a biomass-powered boiler is RM5 million more than the cost of installing natural gas piping. “The construction cost for a biomass-powered boiler is more expensive but we can save on the operating cost in the long run,” he said.
  
  With the costlier natural gas, the company estimated that fuel would constitute about 11% of its overall production cost compared with 8% previously.
  
  However, Lim said the cost would be reduced by 1% to 2% upon the completion of two factories which would use biomass. The factories would be completed in August and October, respectively. At present, Top Glove has four factories with biomass-powered boilers — two in Malaysia and two in Thailand.
  
  Moving forward, the company would spend 1% of its revenue annually on research and development (R&D) in technology, which could save another 10% to 20% in cost.
  
  Asked if Top Glove would expand its upstream businesses, Lim said: “We are actually exploring a joint-venture opportunity with the government or third party to lease rubber estate. However, nothing is concrete yet.”
  
  “We are not in a hurry to buy rubber estate as we have two latex concentrate plants in Thailand to process raw latex. Rubber estate is very costly now,” he added.
  
  The two factories in Thailand have a total capacity of 70,000 tonnes per annum, supplying 60% to 70% of Top Glove’s latex needs.

Today, the financial Edge decides to do a follow up, 05-08-2008: Top Glove to achieve higher turnover

• PETALING JAYA: Malaysia’s leading glove manufacturer Top Glove Corp Bhd said the company would be able to achieve a higher turnover in the current year ending Aug 31 but it would be lower than the targeted turnover due to the weakening of the US dollar.
  
  The company said the targeted profit of FY08 was affected by the unexpected surge in raw material prices and the inflationary effect.
  
  “In particular, the oil price which has gone up by around 65% and the latex price increased by around 45% compared with last year. The recent revision in gas price of around 72% by the government also affected profitability,” said Top Glove.
  
  It said it would always endeavour to achieve better results than last year, with the commitment of the management team and with the continuous improvement of its glove quality and cost efficiency.
  
  Top Glove clarified that it had not issued any profit warning.
  
  The counter slipped 6 sen to RM3.96 at the close of yesterday’s trade.

Hmm.. I was thinking of what Avatar had commented.

Avatar said...

• On the other hand, when the news in the financial dailies are way off the mark, there are no retractions, no comments...
  
  This just gives many people the *wrong* perception that there are very little or no errors in the news published in the financial dailies.

Huh?