Selected financial report of interest : RUBBER GLOVES

RUBBER GLOVES -M&P POSSIBILITY (CIMB)

read it at the smartbiz blog

Top Glove Corp yesterday said the industry is likely to consolidate as demand slows and costs rise but rivals think this is easier said than done. But industry players mainly agree that the sector’s big six, in terms of capacity, are likely to lead in takeovers of smaller rivals and not do deals between them. Rubber glove makers are facing slower demand growth as global fears over a pandemic flu disease subsides. Costlier latex and a weak US dollar are also affecting sales. Although takeovers seem attractive, there are hurdles like finding strategic fits and the challenge of combining different company cultures.

* In an interview with Business Times yesterday, Latexx Partners head of corporate services Dr Liew Lai Lai admitted her company is an attractive target but denied the company is up for sale to Top Glove. “Yes, they did visit us but it remains a market rumour. We have been receiving a few enquiries all along, it is not just Top Glove. While we’re open to a merger or acquisition, so far, we don’t see a strategic fit that would be mutually beneficial,” she said.

*Kossan Rubber senior manager of group corporate affairs Edward Yip said his company is only open to a deal if it results in value creation. “Bigger does not necessarily mean better. What matters is the bottom line. There has got to be consistent profits, productivity improvement and growth prospects. If a merger creates a bigger company but destroys value, what for?”

* Hartalega Holdings group managing director Kuan Kam Hon concurred and said consolidation among the top six is difficult “because all of us are strong individuals with our own set ways of doing business.” “We don’t see this happening at the moment. On paper it looks logical but in reality there are many hidden hindrance,” he said. (BT)

The news on consolidation is not entirely new. Among all the big six manufacturers that we cover, Top Glove, the industry leader, is the only company that is aggressively on the look out for acquisition in order to expand its market share. The current tough operating environment could provide opportunity for Top Glove to acquire a smaller competitor given that it now has RM299.5m net cash in hand.

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