TOP GLOVE CORPORATION BHD Investor Presentation 13 November 2018 Bursa Malaysia : 7113 SGX : BVA Reuters : TPGC.KL Bloomberg : TOPG MK ADR CUSIP : 890534100 Page 1/20
TG BUSINESS ETHICS CLAPS Ready, 1 2 3 Claps, 2x 3x 2x Prepared By: Ng Chin Yong @ 14/07/17 Checked & Verified By: Ng Yong Lin @ 14/07/17 Page 2/20
Top Glove Corporation Bhd ( Top Glove ) at a glance World s largest manufacturer of gloves Global leader in medical and surgical gloves Current market capitalisation (1) of RM14.67bn (USD 3.50bn) FY18 Revenue of RM4.2bn and PATAMI of RM0.4bn 60.5 billion gloves pa 40 factories 648 production lines 2,000+ customers across 195 countries Over 17,000 employees Source: Bloomberg Notes: (1) Market capitalisation as at 13 Nov 2018. Translated at FX rate of USD1:RM4.20 Page 3/20
From Humble Origins to Global Leader Nearly 3 decades of track record of excellence 1991 Started as a local business enterprise 1994 First overseas foray and established a marketing arm in the USA 2001 Commenced operations in Thailand Listed on the Second Board of Kuala Lumpur Stock Exchange ( KLSE ) 2002 Commenced operations in China Established a second rubber glove factory in Thailand Transferred to the Main Board of KLSE 2013 Established first dedicated Group R&D Centre to drive innovation Acquisition of the remaining minority stake in Medi-Flex and privatisation of the company 2010 Revenues over RM2bn 2011 Acquired a marketing arm in Germany to extend sales in Europe 2016 Secondary listing on Singapore Stock Exchange ( SGX ) 2006 Acquisition of a majority stake in Medi- Flex 2007 Revenues over RM1bn 2017 Investment in new businessline - condom projected to be operational by mid-2018 Revenues over RM3bn 2018 Acquisition of Aspion Acquisition of Eastern Press Acquisition of Duramedical Page 4/20
Strong Industry Fundamentals Steady growth in global demand for rubber gloves In billion pieces 103 127 CAGR 05-18: 6.4% 135 173 230 Driven by strong market fundamentals across geographies 1) As a protective barrier for medical staff, gloves are an indispensable item in the healthcare sector, with increasing customer awareness in developing markets 2) Increasing hygiene standards and healthcare awareness a) Non-medical sector in developed countries b) Medical sector in developing countries 3) A growing ageing population a) With the elderly being more susceptible to higher risk diseases 2005 2008 2011 2014 2018E Further growth potential from emerging markets 4) Progressively stringent health regulations a) Healthcare reforms in US, China b) Healthcare regulations: OSHA in the US, EU-OSHA in Europe, SESI in Brazil 5) Emergence of new health threats a) A(H1N1), SARS, bird flu, ebola, bio-terrorism, Anthrax Based on 2017 statistics Developed countries (USA, EU29 and Japan) 20% % of World Population % of Global Glove Consumption 70% Other regions 80% % of World Population 30% % of Global Glove Consumption Source: Malaysia Rubber Gloves Manufacturer Association, International Trade Centre and Company & www.worldmeters.info Page 5/20
Top Glove s Distribution Across 195 Countries Distribution 6 marketing offices globally Over 2,000 customers Comprising distributors across 195 countries A geographically diverse customer base An OEM manufacturer in every region Top 20 customers represent c.25% of total revenue No single customer contributes more than 4% of revenue USA Germany China FY2018 Sales Volume Breakdown Africa Middle East 3% 8% Thailand Latin America 11% Europe 31% Malaysia Asia ex-japan 15% Japan 7% North America 25% Brazil Legend: Distribution hub Page 6/20
Aligning Our Product Mix with Market Demand 50% 48% Glove type by volume 46% FY2018 product mix by revenue 40% 30% 20% 39% 36% 32% 28% 32% 24% 20% 18% 19% 20% 36% 31% 20% Nitrile glove Latex powdered glove Latex powder-free glove 10% 0% 10% 8% 11% 6% 6% 2% 2% 2% 2% 2% FY2014 FY2015 FY2016 FY2017 FY2018 Vinyl / TPE / CPE glove Surgical glove Page 7/20
Continuous Growth in Manufacturing Capabilities Existing facilities Manufacturing Country Glove type Current: Number of production lines Capacity (pieces per annum) Glove : 32 glove factories All 648 lines 60.5 bn Expansion in progress : Glove F32 1 st Phase (Early 2019) Malaysia Nitrile 22 lines 2.2 bn F32 2 nd Phase (End 2019) F33 New Block (Early 2019) F5A New Block (End 2019) F8A New Factory (Early 2020) Malaysia Malaysia Malaysia Thailand Nitrile Nitrile Nitrile Nitrile/Latex 12 lines 12 lines 20 lines 32 lines 1.2 bn 1.2 bn 2.0 bn 3.2 bn Malaysia Headquarters 29 Glove Factories 2 Chemical Factories 1 Glove Former 1 Packaging factory 1 Dental dam factory 1 Condom factory Producing: 1) Latex & nitrile examination gloves 2) Surgical, household, cleanroom, 3) CPE/TPE gloves 4) Former & Chemical Manufacturing 5) Dental Dam 6) Condom Total expansion 98 lines 9.8 bn Total by 2020: 34 glove factories 746 lines 70.3 bn Current: F35CD Condom Factory Latex 1 line 0.1 bn Latex Processing Top Glove: 2 latex plants Sourcing majority of the latex requirements Clear blueprint for further growth Boosting nitrile capacity in tandem with growingdemand Faster, more efficient and technologically advanced production lines Increased automation throughout the manufacturing process On-going facility optimisation initiatives which include the construction of highly-efficient factories Thailand 2 Latex Plants 2 Glove Factories Producing: 1) Latex examination gloves 2) Latex concentrate China 1 Glove Factory Producing: 1) Vinyl gloves Page 8/20
Cost Breakdown Natural Rubber Gloves Nitrile Gloves A cost pass-through mechanism whereby both cost increases and savings to be shared out with customers. Continuously improving cost efficiency through intensive R&D initiatives. Page 9/20
Raw Material Price Trend Natural rubber latex price trend (RM/kg) Correlation between natural rubber latex, nitrile latex and crude oil prices (USD/kg) Note: NR Latex & Nitrile Latex based on 60% TSC Page 10/20
4Q18 Quarter Results ending 31/08/18 4Q18 1 Jun18 31 Aug 18 4Q17 1 Jun 17 31 Aug 17 Variance (4Q18 vs 4Q17) 3Q18 1 Mar 17 31 May 18 Variance (4Q18 vs 3Q18) Total sales (RM mil) 1,217.4 902.4 34.9% 1,100.6 10.6% EBITDA (RM mil) 202.9 127.2 59.5% 181.9 11.5% EBITDA margin 16.6% 14.1% 16.5% PBT (RM mil) 147.9 99.1 49.2% 134.2 10.2% PBT margin 12.1% 11.0% 12.2% PAT (RM mil) 102.6 94.1 9.0% 119.4 (14.1%) PAT margin 8.4% 10.4% 10.8% EPS (sen) 4.0 3.8 5.3% 4.6 (13.0%) Sales quantity up by 27% vs 4Q17 and 6% vs 3Q18. Natural rubber latex price down by 23% vs 4Q17 and 3% vs 3Q18. Nitrile latex price up by 33% vs 4Q17 and up by 14% vs 3Q18. USD weakened by 6% vs 4Q17 and strengthen by 3% vs 3Q18. 4Q18 with natural gas price up by 24% vs 4Q17 and maintained vs 3Q18. Higher taxation expenses for 4Q18 due to provision of deferred tax liability. Page 11/20
FY2018 results ending 31/08/18 FY2018 1 Sep 17 31 Aug 18 FY2017 1 Sep 16 31 Aug 17 Variance (FY2018 vs FY2017) Total sales (RM mil) 4,214.5 3,409.2 23.6% EBITDA (RM mil) 694.1 480.9 46.9% EBITDA margin 16.5% 14.1% PBT (RM mil) 528.6 385.0 37.3% PBT margin 12.5% 11.3% PAT (RM mil) 437.9 330.5 32.5% PAT margin 10.4% 9.7% EPS (sen) 17.0 13.1 29.8% Sales quantity up by 26% vs FY2017. Natural rubber latex price down by 22% vs FY2017. Nitrile latex up by 3% vs FY2017. USD appreciate by 7% vs FY2017. FY2018 with natural gas price up by of 15% vs FY2017. Page 12/20
Steady growth since listing in 2001 For FY ended 31 August Revenue CAGR Past 18 years since listing in 2001 : PAT CAGR Past 18 years since listing in 2001 : Average PAT margin Past 18 years since listing in 2001 : 21.5% 22.2% 9.5% (in RM mil) 2010 2011 2012 2013 2014 2015 2016 2017 FY2018 Sales 2,079.4 2,053.9 2,314.5 2,313.2 2,275.4 2,510.5 2,888.5 3,409.2 4,214.5 EBITDA 364.7 196.7 297.7 310.6 301.8 441.7 524.7 480.9 694.1 EBITDA margin 17.5% 9.6% 12.9% 13.4% 13.3% 17.6% 18.2% 14.1% 16.5% PBT 305.0 145.5 240.7 242.2 216.3 363.5 442.2 385.0 528.6 PBT margin 14.7% 7.1% 10.4% 10.5% 9.5% 14.5% 15.3% 11.3% 12.5% Taxation 54.6 30.3 33.4 39.4 32.7 82.3 79.8 54.5 90.7 PAT 250.4 115.1 207.3 202.8 183.6 281.2 362.4 330.5 437.9 PAT margin 12.0% 5.6% 9.0% 8.8% 8.1% 11.2% 12.5% 9.7% 10.4% ROE (%) 22.4 % 10.0% 16.2% 14.9% 13.1% 17.4% 19.9% 16.0% 18.1% EPS (RM)** 0.10 0.05 0.09 0.08 0.08 0.12 0.15 0.13 0.17 * Annualised **Adjusted for bonus issue Page 13/20
Cash Flow and Capital Management Net cash flow from operating activities (RM mil) Capital expenditure (RM mil) FY2018 31 Aug 18 342.0 461.8 FY2017 31 Aug 17 381.1 482.9 As at 31 Aug 18 As at 31 Aug 17 Net borrowing/net cash and short term investment (RM mil)** Shareholders equity (RM mil) Net assets per share (RM) Return on equity Inventory turnover days Receivable turnover days Payable turnover days Working capital turnover days (1,854.4) 2,393.8 1.87 18.1% 38 46 38 46 70.6 2,064.4 1.64 16.0% 32 43 43 32 Page 14/20
Dividend and payout ratio Dividend Policy : Payout ratio of 50% of PAT after MI Total dividend payment of RM1.25 billion since listing in 2001 4.0 4.0 4.0 4.0 5.8 0.8 7.3 7.3 4.3 4.3 8.5 5.0 1.2 1.4 2.8 0.8 0.9 1.2 0.7 0.4 0.6 0.7 0.8 0.3 0.3 0.5 0.7 0.9 2.3 2.8 3.0 2.3 2.3 2.3 1.5 3.5 3.0 3.0 1.8 1.8 1.8 1.8 2.0 1.3 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 21 27 32 66 99 68 99 99 99 143 182 182 217 25% 31% 29% 39% 40% 60% 49% 50% 55% 51% 50% 55% 50% Note: Dividend per share has been adjusted with the bonus issues Total Dividend (RM'mil) Payout Ratio Page 15/20
Track Record of Delivering Shareholder Value Total Shareholders Return of 9,281% over 18 years since listing in year 2001 With initial investment of 1,000 shares made based on IPO price of RM2.70 on 27 March 2001, the return would be: Number of shares held (1) Market value Accumulated (as at 13 Nov 2018) Dividends Investment cost (as at 27 March 2001) Capital appreciation (2) Total shareholder return # RM RM RM RM % 40,768 234,008 19,264 (2,700) 250,572 9,281% Source: Bloomberg as of 13 Nov 2018 Notes: (1) 1,000 shares at IPO, adjusted for bonus issue and share split since IPO (2) Calculated based on adding market value and accumulated dividends and subtracting the investment cost Page 16/20
Guiding principles for growth and success Top Glove s Business Direction, Ethics, Rules & Philosophies Must know, Must do, Must teach Business direction 1. To produce consistently high quality gloves at efficient low cost. Investment direction 1. To invest 1 efficient dollar and earn 2 healthy dollars. Business philosophies 1.We work for our customers; 2.We take care of the interest of our shareholders; 3.We ensure that our employees continue to contribute positively to the company and we care for their well-being; and 4.We work closely with our bankers, suppliers, business associates and friends. Business ethics 1.Honesty 2.Integrity 3.Transparency Business rules 1.Do not lose our shareholders money; 2.Do not lose our health; 3.Do not lose our temper; 4.Do not lose our customers. Page 17/20
Management Focus Moving Forward 1. To use technology and further automate production lines to reduce reliance on workers & improve quality and efficiency. 2. To computerize and digitalize the company s operations and manufacturing process. 3. To embark into Digitalization and Automation via Industrial Revolution 4.0 implementation through the application of IoT, robotics and automated real time manufacturing system. 4. To continuously invest in and recruit staff who are Intelligent, Energetic and Act with Integrity. 5. To capture growth in demand from emerging markets. 6. To capture 30% of the global market share by 2020. 7. To diversify into other businesses such as condom manufacturing and dental dam. Page 18/20
Thank you www.topglove.com invest@topglove.com.my +603 3362 3098 Page 19/20
TOP GLOVE GROUP OF COMPANIES Ready, 1 2 3 TOP GLOVE Top Quality Top Quality Top Quality Prepared by : QA Admin (Rev. 6, Date Prepared : 14/7/17) Verified by : Ms. Loo Sun Nooi / QA DGM Claps, 2X 3X 2X YES! YES! YES! Page 20/20