BIG SUM: RM30m for Indonesian estate, RM50 for HQ upgrade, RM120m for new plants
TOP Glove Corp Bhd has allocated RM200 million as capital expenditure for the current year ending August 2014, of which more than half of the amount will go to expanding its factory capacity.
Executive director Lim Cheong Guan noted that in the last financial year ended August 2013, the group spent RM311.8 million.
"This was a big sum because apart from the usual factory expansion, the group had also bought 30,773ha of rubber estate in Indonesia and is taking private its Singapore-listed unit Medi-Flex Ltd.
"This year, we're back on the usual track of investments, mainly further expansion of our glove factories. About RM120 million will go to putting up new factories, another RM30 million for development of rubber estate in Indonesia and RM50 million for the upgrade of our corporate headquarters," he said.
Currently, Top Glove's production lines are able to churn out 43.9 billion pieces a year. Lim said by June next year, the group aims to ramp up annual output to 46 billion pieces.
Of the total, Top Glove targets to expand its nitrile glove production to 17 billion pieces, its managing director KM Lee said is "fairly close to some of the other big nitrile glove players in the market".
As for the plantations, if Top Glove were to start planting up this year, it would take seven years for the rubber trees to mature and earnings contribution is only expected in 2020.
The first phase of development would likely span across 5,000ha, out of the 30,773ha planned.
In view of the tabling of the 2014 Budget next week, chairman Tan Sri Lim Wee Chai reiterated his call for the government to reduce corporate tax to 23 per cent from the current 25. In lowering corporate tax rates, the government stands to attract re-investments and entrepreneurship among the business community.
"Malaysia is among the countries that are still imposing high tax compared to Thailand and Singapore," Lim said.
He highlighted that Thailand had, over the years, reduced its tax rate from 30 per cent to 20 per cent.
"By doing so, foreign investors are encouraged to plan for the long term and take on more active roles in contributing to the economy.
"Efficient investment practice should be improved from time to time to encourage re-investments and value add via productive innovations," Lim added.