From record sales to government probe, 2020 an eventful year for Malaysia’s Top Glove

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KUALA LUMPUR: It has been an eventful year for Top Glove Corporation Bhd, which has gone from making record profits, brought about by the demands of the pandemic, to being the biggest contributor of COVID-19 cases in Malaysia.

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And to make matters worse, the Malaysian government announced on Tuesday (Dec 1) that it had opened 19 investigation papers into six subsidiaries of the company over offences involving workers’ dormitories.

This marks what could be regarded as a dip in the fortunes of the world’s largest surgical glove maker, now also a manufacturer of the essential face mask.

Top Glove was established by Dr Lim Wee Chai and his wife Tong Siew Bee in 1991 with one factory and one glove production line. The company was listed on Bursa Malaysia in 2001 and later obtained dual listing on SGX in 2016.

Today, it has manufacturing operations in Malaysia, Thailand, Vietnam and China, exporting to 195 countries. It has around 21,000 employees, operates 750 production lines worldwide and holds 26 per cent of global market share for rubber gloves.

Prime Minister Muhyiddin Yassin, when speaking on Apr 25 on the economic impact caused by the enforcement of the Movement Control Order (MCO), said the country lost RM2.4 billion (US$550 million) in economic revenue every single day the MCO was enforced.

“UNPARALLELED GROWTH IN SALES VOLUME”

However, for Top Glove, being the leading manufacturer of an essential product used by frontliners meant there was a sudden spike in demand.

Dr Lim told CNA in February that some Top Glove factories were having worker shortage issues, especially in the packing section. The temporary solution was to outsource the packing process to meet the demand, he said at that time.

In early June, Dr Lim was quoted as saying by the Edge that the company’s production utilisation had increased from 85 per cent to nearly 100 per cent in order to meet the soaring demand.

The company also said in a statement then that its share price at the Malaysian stock exchange surged by more than 255 per cent this year alone.

On Jun 11, the company in its financial report indicated that there was 366 per cent year-over-year jump in net profit to RM347.9 million (US$85.31million) in the quarter which ended in May.

This leap was almost equivalent to the full-year income of the company the year before (RM367.5 million).

Top Glove said that the immense growth in revenue was to be attributed to the “unparalleled growth in sales volume” which the glove maker shared had increased by about 180 per cent monthly.

On the same day, executive director Lim Cheong Guan reportedly said that there was a surge in demand for gloves “from virtually every country in the world” as a result of the coronavirus pandemic, pushing Top Glove’s quarterly earnings to a record high.

He said “the best is yet to come” and explained that many customers had made advance orders as early as a year ahead for fear of missing out.

When interviewed by CNA in July, Dr Lim said all Top Glove factories were running at almost full capacity. He also said that he wanted to add up to 10 more factories over the next two years.

This was a higher target than the usual one or two factories a year, he said.

The company’s production capacity at the time was 75 billion pieces of gloves a year and by 2021, this would be increased to close to 100 billion, said Dr Lim.

In September, the glove maker posted its highest ever net profit of RM1.29 billion for the quarter ended Aug 31. Revenue jumped by 116 per cent year-on-year to RM3.11 billion.

Following the tabling of the 2021 Budget on Nov 6, Top Glove confirmed that it would be giving RM185 million to the government as a contribution to help the country battle the pandemic.

US BARS TOP GLOVE IMPORTS

Top Glove was thrust into the spotlight internationally on Jul 15 when the US Customs and Border Protection (CBP) slapped a ban on imports from two of its subsidiaries over forced labour concerns.

The North American market accounts for about 27 per cent of Top Glove’s total exports last year.

The company reportedly submitted a petition to the CBP to prove that it did not use forced labour, but the CBP responded by identifying additional information needs.

Top Glove’s initial timeline was to resolve the issue by end-August. However, the ban imposed by the CBP has yet to be lifted.

Speaking to reporters in Parliament on Aug 5, Dr Lim said Top Glove was trying to find a solution to the forced labour allegations and had to explain the matter to CBP.

“We should be able to solve the issue within this month,” he was quoted as saying by the Edge.

Dr Lim claimed that old issues surrounding the allegations arose lately due to the work of an activist known as Andy Hall, who intended to “sabotage” the group.

“He (Hall) said bad things about the company and the industry,” he said.

Dr Lim said Top Glove had in the past permitted its workers to work overtime because they wanted to work longer hours.

He also claimed that the foreign workers’ passports were retained for “safekeeping” and that the company had already returned the documents to them more than a year ago.

In early October, Top Glove said it had raised remediation payments to migrant workers for recruitment fees to RM136 million.

The Malaysian Human Resources Ministry said it had met with the Malaysian Rubber Glove Manufacturers Association and other rubber manufacturing companies to discuss the US ban, and set up a task force to ensure policy compliance, including when hiring foreign workers.

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“(The ministry) does not condone and tolerate any act of forced labour as well as compromise towards non-compliance of any practice amounting to forced labour,” it said.

VICTIM OF THE PANDEMIC

From initially benefitting from the surge in demand for medical supplies, Top Glove has now become a victim of the pandemic like many other companies, with its dormitories identified as an epicentre of infections.

A third wave of infections has hit the country, with some states and districts returning to a conditional MCO. There are now more than 68,000 cases nationwide.

As of Dec 2, the Teratai cluster has a total 5,083 cases. It has been found that the majority of those affected by the cluster were foreign workers working for Top Glove.

Considering the situation, the government on Nov 17 imposed two weeks of enhanced MCO (EMCO) at Top Glove worker dormitories in Meru, Klang.

Following the detection of the cluster, the government said on Nov 23 that 28 of Top Glove’s factories in Klang would be closed in stages to facilitate COVID-19 screening.

On the back of the news, Top Glove’s shares fell as much as 7.48 per cent the next morning.

On Nov 30, Senior Minister Ismail Sabri Yaakob announced that the EMCO would have to be extended for a further 14 days until Dec 14.

In a press conference, Mr Ismail Sabri said the decision to extend the EMCO was made due to the persistently high rate of positive COVID-19 cases among the workers there.

“The risk assessment by the Ministry of Health found that the positive rate in this area is still high where there are still new positive cases detected among employees through the second screening tests.

“Besides that, the ministry found that the negative cases in this cluster are still at risk and a second screening test is underway,” he said.

Mr Ismail Sabri said all Top Glove workers involved in the cluster will be issued Home Surveillance Order (HSO) for 14 days. Workers will also wear wristbands for surveillance, have daily health checks and undergo a repeat COVID-19 test on the 13th day of their HSO.

He added that those required to be under quarantine will not be allowed to work until their screening test results come out negative and the HSO release given.

All costs for the workers’ COVID-19 screening, quarantine facilities and related food, transport and accommodation will be borne by Top Glove.

INVESTIGATION PAPERS OPENED OVER WORKERS’ HOUSING

The government had initially defended Top Glove’s track record.

Following the CBP ban, Human Resource Minister M Saravanan reportedly said on Jul 21 that much of the reported information was “exaggerated”.

“I instructed the Labour Department to investigate and it was found most of the accusations are baseless. There are some shortcomings which can be resolved, such as accommodation, but it’s not as bad as they say,” he said.

However, The Star later quoted Mr Saravanan as saying on Nov 25 that checks on the Top Glove factories in Klang revealed “deplorable” conditions at the workers’ housing.

“I have visited the hostels and the conditions are terrible. My officers were ordered to go in full force as this is a big, vulnerable migrant workers colony. If we don’t act, this cluster might get out of control.

“The Labour Department will ensure the employers are held responsible for worker conditions and dire action will be taken according to the law,” the minister said.

FILE PHOTO: Top Glove workers wait for food distribution outside a hostel under enhanced lockdown i
FILE PHOTO: Top Glove workers wait for food distribution outside a hostel under enhanced lockdown in Klang, Malaysia on Nov 17, 2020. (Photo: Reuters/Lim Huey Teng)

On Tuesday, the Malaysian government said it had opened 19 investigation papers into six subsidiaries of Top Glove over offences involving workers’ dormitories.

This followed simultaneous enforcement operations carried out by the Peninsular Malaysia Labour Department (JTKSM), an agency under the Human Resources Ministry last Thursday.

“The main offence was that the employers failed to apply for accommodation certification from the Labour Department under Section 24D of the Workers’ Minimum Standards of Housing and Amenities Act 1990,” JTKSM director-general Asri Ab Rahman said on Tuesday.

This had led to other offences including congested accommodations and dormitories, which were uncomfortable and poorly ventilated, he added.

In addition, the buildings used to accommodate the workers did not comply with local authorities’ by-laws.

“JTKSM will take the next step to refer the investigation papers already opened, to the Deputy Public Prosecutor so that all these offences can be investigated under the Act,” Mr Asri said.

Each violation under the Act carries an RM50,000 fine as well as potential jail time.

In a statement on Tuesday, Top Glove noted the government had said earlier that errant employers would not be fined under amendments to the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446), as the enforcement of the act was still in its early stages.

“Top Glove wishes to clarify that efforts to source for more accommodation and to improve existing worker accommodations are ongoing in view of the large number of workers we employ,” it said.

“We expect to complete the exercise of improving workers’ accommodation around Dec 31, 2020. This is in line with the government’s educational approach on employers in various sectors until the end of this year, so that they can comply with Act 446.”

-CNA

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