As the founder and chairman of the world’s largest rubber glove manufacturer, Lim Wee Chai was not new to health crises when coronavirus struck this year. In its three-decade history, his company Top Glove has responded to outbreaks of H1N1 influenza, Sars and Ebola as well as the HIV/Aids epidemic.
But Covid-19 has spread so far and so fast that it is unlike any other pathogen Lim has ever seen. “This time with Covid-19 the scale is much bigger,” says the 62-year-old billionaire from Top Glove’s Kuala Lumpur headquarters in an FT interview over Zoom. “The whole world has been affected by this pandemic . . . This virus is very strong, very smart . . . Human beings have to think of a better way to overcome the problem”.
While most companies around the globe have been hit by national lockdowns, plunging sales and deep recession, Malaysia-based Top Glove is one of the fortunate few to be making products that are now in the highest demand.
The company’s main challenge has been to keep its 44 factories around the world running 24 hours a day, seven days a week, to meet soaring orders for medical gloves from 195 countries, practically every state on the planet.
“Before Covid-19 our production capacity was running at about 85 per cent,” says Lim. “Because of good demand it [has] now increased to 100 per cent. In fact we are also building more new lines, more capacity”.
Even so, Top Glove’s lead time for orders has increased almost 10 times, from 30-40 days to nearly 300 days. Prices are rising as well as output, even as rival rubber glove makers in Malaysia and key Chinese competitors manufacturing from vinyl expand volumes to meet global annual demand now seen as far exceeding last year’s 290bn pieces.
Top Glove’s share price has risen more than 250 per cent this year, giving it a market value of about $10bn in early June. With a 27 per cent stake, Lim himself is now worth about $2.6bn, according to Forbes, the US business media group, putting him among Asia’s 778 billionaires.
His success in the midst of a pandemic is only the latest reminder of south-east Asia’s rising economic and financial clout, with ambassadors from the developed world, including Japan, Australia and the Netherlands, beating a path to his door to help solve supply crises on which their citizens’ health depends.
Top Glove — which claims to account for 26 per cent of the world market for rubber gloves — is an example of the kind of added-value own-brand production the Malaysian government has long sought to help lift the nation from middle-income status into the ranks of advanced economies.
Lim’s personal history reflects this modernisation drive, which has seen an economy based on commodities industrialise and diversify. His ethnic Chinese parents went into business as traders and rubber plantation owners when the country was still emerging from the British empire.
Lim’s early life coincided with the tumultuous early years of Malaysia’s independence, which were marked by tensions between the majority ethnic Malays and the smaller, but largely wealthier, Chinese community, culminating in race riots in 1969. The Malay-dominated government eased the conflict by developing pro-Malay policies which still left scope for Chinese families to succeed, principally in business.
Before founding Top Glove, Lim worked in sales at OYL Industries, a Malaysian air conditioner manufacturer later acquired by Japan’s Daikin, and then went to study in the US, completing an MBA at Sul Ross State University in Texas. He started Top Glove in 1991 with a single production line in a factory in Meru, near Kuala Lumpur, and 100 employees. The company was floated in Kuala Lumpur in 2001 and listed in Singapore, on the region’s most international exchange, in 2016.
Lim’s hands-on business style is widely seen as the source of his success. In rising to commercial prominence, and now in tackling coronavirus, he takes one step at a time. “Every day we have so many problems: marketing problems, supplier problems, production problems . . . every day we solve. If no problem, it’s not a business,” he says.
“You could call him a real industrialist,” says Rizal Ishak, a consultant to Malaysia’s glove manufacturers, citing a strict management culture focused on ensuring seamless production and that “everything is funded well . . . He runs a very tight shop, no question”.
Among the “chairman philosophies” listed on Top Glove’s website is a call on staff to clean, eat, work, exercise and sleep well to achieve “reverse ageing”, accompanied by a photo of Lim playing badminton. Another section lists four types of learners: fast, slow, non-learner or wrong learner. “The choice is yours. What will you choose?” the chairman asks.
The down-to-earth approach is serving the company well with Covid-19. Lim expects sales in the year to August to grow 30 per cent to more than 6bn Malaysian ringgit (US$1.4bn) from RM4.8bn in the last financial year. That compares with a compound annual growth rate of 21 per cent in the last 19 years. CIMB, a Malaysian bank, forecasts Top Glove’s net profit to more than double from RM368m in 2019 to RM864m this year and RM1.2bn by 2021.
The overwhelming demand, which has seen desperate governments leapfrogging each other to buy protective gear for health workers, has allowed glove manufacturers to raise prices. Lim says the price of his gloves has grown about 10 per cent per month since February while the “spot” price, for immediate delivery, has doubled. “But 90 per cent [of our glove output] is sold to our regular customers. Ten per cent may be [sold at the] spot price”.
He says the company did what it could to fill orders coming from around the world and to answer the foreign diplomats’ appeals. “They asked us to help. We did our best to try to fulfil their requirements,” says Lim, adding he also recently received inquiries from the World Health Organization on behalf of less developed countries in Africa and elsewhere.
Top Glove is well placed to benefit commercially. Walter Aw, a senior analyst at CIMB, says that among its Malaysian competitors, “Top Glove is in a prime position to benefit because they’re the largest glove maker in terms of capacity [and they have] the largest distribution network.”
Ramping up production amid global supply chain glitches and closed borders has not been easy. Malaysia itself imposed a near-total lockdown from mid-March, which only started to ease earlier this month.
Top Glove’s suppliers, mainly located in Malaysia, which accounts for the bulk of its output alongside plants in Thailand and China, shut down for about a fortnight. But with the company typically holding two weeks’ stock of raw materials, Lim says production did not suffer. “If suppliers [had] continued to delay our stock for one month then we’d be in trouble,” he adds.
Lim says that avoiding coronavirus contagion among his workforce has been a challenge, but that employing doctors, nurses, pharmacists, nutritionists and dentists on site has helped Top Glove manage the risks.
The company, with 19,000 employees, is also facing labour shortages as it looks to increase its 12,000-strong production floor staff to ensure it runs at full capacity.
While foreign workers account for about 60 per cent of Top Glove’s personnel, mainly from Nepal and Bangladesh, Malaysia’s closing of its borders in March forced the company to focus on hiring locally. “[We] still have some shortage . . . but we should be able to get enough workers from companies that are retrenching and reducing their workforce,” he says.
Difficulties recruiting labour, even from abroad, have landed the industry in controversy over claims that employers have exploited migrant workers. In December 2018, The Guardian newspaper reported allegations from 16 foreign workers employed at Top Glove in Malaysia that they were required to work long hours for low pay. They also claimed that they had had their passports held by the company and were unable to get them back. Labour activists regard this practice as coercive as it can hinder a worker’s freedom of movement.
Top Glove told The Guardian at the time that it was working to address excessive overtime working. It said it met “local labour law requirements” and had “a zero-tolerance policy with any regard to the abuse” of human rights. Asked for comment by the FT for this article, Top Glove denied any wrongdoing, citing its 2019 annual report in which it said the Guardian report was “highly inaccurate” and set out detailed changes in labour policies. The annual report says the company had “revised” its safekeeping policy on foreign workers’ passports and “workers now have full custody of their passports”. Top Glove told the FT that the policy was changed in December 2018.
The annual report also refers to steps the company has taken to tackle another problem often linked with migrant labour — heavy recruitment charges imposed by employment agents on workers. The Top Glove report says that in January 2019, the company implemented a “zero recruitment fee policy” under which it bears “all the recruitment fees and costs associated with accommodation, medical check-ups and travelling”.
It did not answer an FT question about who paid the recruitment fees before the policy change but said “we continuously improve and strengthen” our policies and it had ended relationships with recruitment agents who failed to meet its standards.
In the longer term, Malaysian glove makers face structural challenges. While the industry is now in the limelight, its products are low-added-value goods, selling for low prices (outside a pandemic). By value, medical and non-sterile gloves represent only 1.3 per cent of Malaysia’s total exports of goods and services.
Richard Record, lead economist for Malaysia at the World Bank, says productivity remains a concern for a sector that relies heavily on labour-intensive manufacturing. So if Malaysia wants to fulfil its aspiration of becoming a high-income country, “it will be key to focus more on building the quality of workforce skills, promoting quality investments, and intensifying technology adoption across all sectors of the economy to boost competitiveness, including in the manufacture of protective medical equipment,” he adds.
If he is right, the glove makers’ problems in hiring low-cost labour will only multiply. So will the challenges for the rubber producers, who have in recent years abandoned plantations because prices have been too low.
And even though Malaysia is the world’s third-largest rubber grower, it is also the third-biggest importer, as demand far exceeds local supply. The glove makers source two-thirds of their needs for latex — a semi-processed material made from rubber — via imports, mainly from other south-east Asian states.
In its annual report, Top Glove says its financial performance is susceptible to commodity price fluctuations, particularly in latex. But Aw, the CIMB analyst, is not worried given that an oversupply of latex is keeping it cheap while rubber glove prices are rising.
Lim remains optimistic about the future. Top Glove will overcome the current global recession “because we are in the right industry and we have the right team of people,” he says. “We have overcome five epidemics over the past 30 years. That’s why we must have a good foundation.”
The company is investing in new products, including biodegradable gloves, self-cleaning gloves, low-allergy gloves and moisturising gloves. It has diversified into condoms, dental products and latex tourniquets.
Looking ahead, he is clear about Top Glove’s objectives. He wants his company to join the Fortune Global 500 by 2040, which will involve increasing the company’s revenues 30-fold and expanding to 500 factories. “If we put enough effort I’m sure we can achieve our target in 20 years,” he says.
As for personal goals, Lim is determined to live until he is 120 years old by following the principles of healthy living he has enshrined at Top Glove. “I am still very young . . . it’s just started”.
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment.
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