Lim Wee Chai became a grandfather on April 6. For the 62-year-old, it was not the only thing to cherish in the face of the coronavirus pandemic.
Lim can also find satisfaction in the way Top Glove — the surgical gloves maker he founded in Malaysia almost three decades ago — has taken on a crucial global role in helping doctors, nurses and other health care professionals confront the coronavirus crisis.
And the last few weeks have not been bad for business either.
Top Glove’s 44 factories and 18,000 employees are working around the clock to try to meet a massive upsurge in demand amid the spiraling health crisis, in which gloves are a vital barrier against coronavirus transmission.
Orders have more than doubled. As a result, Top Glove — already the world’s largest supplier of nitrile and latex medical gloves — is on track for a bumper year and a market share of between 30 and 35%.
Already global demand for gloves was expanding at a rate of 10% annually. Now Lim, who is Top Glove’s largest shareholder and executive chairman, expects that rate to double this year, as annual global demand surpasses an astonishing 300 billion single pieces.
COVID-19 has focused the world’s attention on supply chains for everything from hand sanitizer to masks and medical gloves — putting Malaysia’s key role in this vital but often overlooked part of the health care industry in the spotlight.
Before the outbreak, sales orders came mainly from China, Hong Kong, Singapore and South Korea — but now they are pouring in from Europe and the U.S. “Governments from various countries are also approaching us, with a view to sourcing gloves directly from us,” Lim told Nikkei Asian Review in an e-mail interview.
“In order to cope with demand, we have upped our utilization close to 100%, while our lead time has increased from 30 days to as much as 150 days,” Lim said.
Lim is also balancing orders with keeping his company on track — stepping up internal housekeeping and taking the chance to review stock levels, pricing and payments.
“During this critical time, it is not only important to look after one’s personal health, but we must look after the financial health of the company. To ensure we are prepared to face and overcome these pandemics, we need to work hard to stay healthy — physically, mentally and financially,” he said.
Malaysia’s rubber industry began in 1878, supposedly on the back of seeds brought out of Brazil, which until then had dominated supply. Rubber quickly became a backbone of the economy and Malaysia remains one of the top three producers, along with Indonesia and Thailand.
The country’s 1.7 million hectares (17,000 square kilometers) of plantations, ranging from small privately-owned plots to vast estates, produce almost 20% of the world’s natural rubber. Malaysia is also the world’s largest exporter of natural rubber medical gloves, catheters, latex thread and condoms.
Lim, a self-made billionaire whose parents were rubber plantation owners and traders, started Top Glove in 1991 with a single production line in a factory in Meru, Selangor (some 40 kilometers, or 25 miles, from Kuala Lumpur), and 100 employees. Today, the company is multinational and has four factories in Thailand and one in China as well as the dozens of plants in its home country. Some 700 production lines can produce almost 74 billion pieces annually.
Its gloves go to 195 countries; Top Glove has sales offices in Germany, the U.S. and Brazil, selling to more than 2,000 customers including governments, hospital chains and retail giants. Top Glove claims to have a 26% share of the rubber gloves market.
Since 1991, the company’s compounded annual growth rates for revenue and profit have been 21.7% and 19% respectively. Sales rose 14% to $1.1 billion in the last financial year to the end of August. For the first half of the current financial year ended Feb 29, Top Glove posted a net profit of $52.26 million, on the back of $559.63 million in revenue.
When the coronavirus began to be reported in China early in 2020, Lim saw what was coming — and ramped up production to close to 100% to fill the demand. Though it was business for Top Glove, Lim did not forget Malaysian needs and committed a few million complimentary gloves to the country’s medical workforce.
But as business mushroomed, Top Glove was also having to deal with concerns about the spread of the coronavirus, and with the lockdown decreed by the government to try to curb transmission rates.
Malaysian companies are unable to source additional foreign workers — an impediment for Top Glove, where foreign labor makes up about three-quarters of the workforce.
“We are currently also unable to hire any workers in view of travel restrictions imposed. To overcome this, we are exploring hiring local workers, especially for factories [near Kuala Lumpur] where there is a critical shortage, and have started working with recruitment agents to increase the candidate pool,” Lim said.
Top Glove needs at least a thousand more workers to match the expected output, or it will face delays in production and shipments. Lim said some of Top Glove’s vendors, such as packaging material suppliers, were required to close during the lockdown period.
“We are working very closely with our suppliers to overcome the issue and also seeking cooperation and understanding from our customers,” said Lim, adding that many suppliers had received approval to operate after they and Top Glove wrote to the Ministry of International Trade & Industry.
“It is important for all suppliers [to be able to] work with us to ensure timely production and delivery of gloves, which are essential items, especially during this critical time.”
Lim said that even before the coronavirus outbreak, Top Glove had aggressively invested in automation and digitalization to try to ensure the business is future proof, with innovations including robotic arms and more automated packing.
“Challenges such as worker shortage are external and not within our control. At Top Glove, our approach to overcoming challenges has always been to focus on internal factors which are within our control,” he said.
Top Glove listed on the Kuala Lumpur stock exchange in 2001 and in Singapore in 2006. Lim still owns a 27% stake, while his son Lim Jin Feng owns 1.55%. Lim’s wife Tong Siew Bee and his brother Lim Hooi Sin are company directors. Other shareholders include Firstway United Corp (7.18%) and state pension funds Employees Provident Fund (5.27%) and Retirement Fund Inc (3.79%).
Perhaps unsurprisingly, Top Glove and its investors have been some of the corporate winners from the coronavirus crisis. Its shares have rallied over 33% year-to-date and are trading at around 33 times its forecast 2021 earnings.
AmInvestment Bank’s Nafisah Azmi said she expected Top Glove’s year-on-year revenue and net profit to grow by 12% and 44%, respectively, in the current financial year — but said a slowdown might be in the cards in 2021.
“Assuming the COVID-19 outbreak is contained within the financial year 2020, we anticipate a slower sales growth in the financial year 2021 (ending in August 2021) due to an excess supply of inventory. We forecast Top Glove’s net profit to contract by 8% in the financial year 2021,” the analyst said.
One issue for Top Glove is whether demand for its medical gloves remains structurally higher once the coronavirus pandemic is contained.
According to MIDF Investment Bank, there should be higher demand for gloves due to increased awareness of hygiene standards — especially in developing countries that the bank said only consume about 30% of total global supply. It estimated that developing regions including India and Africa use less than 10 pieces of gloves per capita per annum, compared with more than 100 pieces per person annually in the U.S.
“New users who have started using gloves during this period are also expected to continue usage even after the outbreak recedes, having gained an appreciation of their importance in protecting lives,” said Lim.
As Malaysia’s month-long lockdown period proceeds, Lim is enjoying rare family time. “I have dinner with my family every night now . . .[before] I would eat with them about two times a week owing to dinner appointments with business associates and other friends,” he says.
“I find that I am now even physically healthier than before the coronavirus because there are now very few external meetings and functions, hence less exposure to health risks. I also have more time to sleep now.”
But the company’s 44 plants, now deemed essential services, are not escaping Lim’s attention as he steers Top Glove through what can be described — appropriately enough — as stretching times. “I make it a point to visit them regularly, at least one factory a day,” Lim said. “Factory visits proceed as normal.”