PETALING JAYA: Top Glove Corp Bhd expects to resolve the issue over the US Customs and Border Protection’s (CBP) detention order on its products within two to four weeks.
The CPB’s action is believed to be related to labour issues.
Despite the orders on the group’s two subsidiaries, Top Glove Sdn Bhd and TG Medical Sdn Bhd, Top Glove Corp executive chairman, Tan Sri Dr Lim Wee Chai, said it will still ship products to the US, but they will be put on hold in the free trade zones, either in the ports or warehouses.
“We estimate the gloves will be detained for two to four weeks depending on the settlement of the recruitment fees, if we can settle the issue within two weeks we can release the products to the customers,” he told the media in a Zoom conference call today.
The group estimated that the exports from the two subsidiaries in the detention list affect half of its gloves shipped to the US, representing 12.5% of its total revenue.
Lim conceded that the profit margins of its gloves in the US are higher than in the other markets. However, he said, should the products need to be diverted to other countries, Top Glove would still be able to command a good selling price.
“Our order book is more than 100% for the next 12-15 months due to the increased demand from the Covid-19 pandemic, so other countries can take up the difference easily,” said Lim.
The update came on the back of Top Glove’s Bursa Malaysia filing, confirming it received the detention orders on July 15.
A Reuters report stated that while the CBP website showed Top Glove Sdn Bhd and TG Medical were placed on its list on Wednesday, there was no statement explaining the action, though its “withhold and release” orders, detaining imported goods, are understood to be specific to forced labour issues.
“From our understanding of the workings of the CBP, it is not necessary for them to have very strong grounds to put a company on the detention list and with our discussions with the consultant the issue of recruitment fees is likely to be the grounds for the action,” said Top Glove’s managing director, Lee Kim Meow.
To remedy the situation, Top Glove has allocated RM20 million to RM50 million as compensation to be paid to its workers, on behalf of the previous agent.
The group said it has been bearing all recruitment fees since the start of this year, but it has yet to resolve an issue regarding retrospective payment of recruitment fees paid, without its knowledge, by workers to agents before January 2019 – when its zero recruitment fee policy was implemented.
Lim said the group has been working on this issue over the past few months, which involves extensive tracing, to establish the correct amount to be paid back to its workers.
Lee said it will engage with the CBP directly through its office in the US, soonest possible.
He highlighted that Top Glove undergoes audits on a regular basis with more than 80 audits conducted in the previous year. However, for 2020, it has gone through roughly 10 audits only, due to the Covid-19 pandemic.
Lee said in its most recent business social compliance initiative audit, Top Glove received the best possible ‘A’ rating.
While Top Glove is working to clarify the issue with the CBP, its stock was battered on the stock market yesterday.
Trading in the stock was halted between 2.30pm and 3.30pm today, pending the group’s announcement. However in an interesting turn of events, trading across Bursa Malaysia was halted at 3.30pm due to technical issues.
The shares were last done at RM21.24, 2.57% lower from their July 15 closing price of RM21.80, with 25.7 million shares done. Based on its last done price, Top Glove shares lost RM1.51 billion in market capitalisation today.
LeInves PLT chief investment/research officer William Ng said the selldown was a knee-jerk reaction to the news, and the long-term prospects of the group and rubber players in general remain intact.
“The two things that could present a real impact on glove players now are resin prices, and if an effective Covid-19 vaccine is developed, which would lead to less demand for gloves and other personal protection equipment,” he told SunBiz.
