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Top Glove plans RM200mil Capex (Update)

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KUALA LUMPUR: Top Glove Corp Bhd plans a capex of about RM200mil for its financial year 2014 (FY14) to be allocated for its new capacity, the foray into rubber planting as well as the building of a new corporate headquarters.

Executive director Lim Cheong Guan said the capex for FY14 was broken down to RM120mil for the capacity expansion, RM30mil for its rubber plantation in Sumatera, Indonesia and RM50mil for the office tower.

“We spent more capex in 2013 largely due to acquisitions of land in Indonesia and building four new factories,” Lim said. For FY13, the group invested RM311.8mil.

Currently, the group has 498 production lines in 24 factories.

By June 2014, it aims to have 25 factories running with 520 lines, with a production capacity of 46.1 billion pieces per annum.

Of that, Top Glove targets to expand its nitrile glove production to 17 billion or 18 billion pieces per annum next year, which managing director KM Lee said was “fairly close to some of the other big nitrile glove players in the market”.

As for the plantations, if Top Glove begins the planting operations this year, it would take about seven years for the trees to mature and earnings contribution is only expected in 2020.

The group will start with 5,000 ha first out of the 30,000 ha planned.

On the Budget 2014 proposals to be announced on Oct 25, Lim said he hoped the government would review and reduce the corporate income tax to 22% or 23%.

“We are paying quite a lot compared to our neighbours. Singpore is paying 17%, Thailand 20% but we are paying 25%,” he said, adding that the higher tax indirectly pushes up costs.

Lim added: If the corporate income tax is high, at least quality service and facilities like security and so on should be provided.

The much-discussed goods and services tax (GST), however, will not have an impact on Top Glove’s profit and loss statement.

“The GST should not have an impact on our performance bottomline because as an export-oriented company, we have the input tax that we can claim back when we export,” (executive director Lim) Cheong Guan said.

It will, however, affect the group’s cashflow as they would need to pay first. That said, Cheong Guan noted that the group’s cashflow position is still healthy.