South Africa

COVID-19: Top Glove warns on deliveries after virus outbreak shuts plants

epaselect epa08838874 A Top Glove employees waits before were transfer to hospital at their hostel near the factory at Setia Alam, outside Kuala Lumpur, Malaysia, 24 November 2020. Malaysia's National Security Council (NSC) announced on 23 November the closure in stages of 28 Top Glove factories in the country after a spike in COVID-19 cases was detected among workers. Top Glove is the world's largest rubber glove manufacturer. The company's shares fell by 7.5 percent on 24 November. EPA-EFE/FAZRY ISMAIL

KUALA LUMPUR, Nov 24 (Reuters) - Malaysia's Top Glove Corp expects deliveries to be delayed and sales to fall below its forecasts after thousands of positive COVID-19 tests among its workers forced the world's biggest rubber glove maker to shutter some factory operations.

The firm said some deliveries could be delayed by four weeks and new orders could take longer to process, while sales could fall 3% short of its projections for the 2021 financial year. Its shares were down by as much as 7.5% on Tuesday.

“To minimise the impact on our customers, we are allocating sales orders to unaffected factories and rescheduling deliveries where possible,” it said in a statement.

Top Glove’s shares, which have soared this year as global demand for protective gear has surged in the pandemic, slipped after the government said it would close 28 of the firm’s factory buildings in phases to screen and quarantine workers in the Klang area, about 40 km (25 miles) west of Kuala Lumpur.

The company did not give a breakdown of how many factory sites were affected by the closure of the 28 factory buildings. Top Glove previously said it had shut 16 buildings and reduced capacity at 12 more.

The firm has about 16,000 factory employees and runs 47 factories in Malaysia, Thailand, China and Vietnam, with 36 producing gloves. Its main markets are Europe and North America.

Shares in the company, which commands a quarter of the global latex glove market, are still more than four times higher than at the start of the year as the firm has racked up record profits this year amid sky-rocketing demand for its products.

As a nation, Malaysia makes just under two thirds of the world’s rubber gloves, the Malaysian Rubber Glove Manufacturers Association said. Hartalega Holdings and Supermax Corp are Malaysia’s other two top glovemakers.

Malaysia’s Health Ministry has reported sharp rises since last week in infections in the Klang area where Top Glove has factories and dormitories.

The ministry said on Tuesday total infections in the Klang cluster reached 4,036 out of 5,777 people screened. It did not specify how many of those were Top Glove workers.

The government, battling the nation’s largest cluster since the pandemic began, erected barbed wire fences in front of the workers’ hostels in the Klang district on Tuesday. Checkpoints were staffed by police and soldiers.

MIDF Research analyst Ng Bei Shan said the closures would reduce Top Glove’s production capacity by 50% and a two-week closure could cut net income by 4% in fiscal 2021 if average selling prices were unchanged. But she said tight supply could push prices up.

Ng said the closures had not affected the company’s orders and was maintaining her earnings estimates for fiscal 2021.

Two other analysts predicted a 2% hit to annual profit.

One analyst said Top Glove’s main rivals did not have spare capacity to increase supply to meet a shortfall, saying Hartalega and Supermax “are already running at best full utilisation rate.”

(Reporting by Liz Lee in Kuala Lumpur; Writing by Sayantani Ghosh; Editing by Raju Gopalakrishnan and Edmund Blair)

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