Thursday August 19, 2010 Top Glove expects demand to grow by 8 to 10percent By Neha Singh KUALA LUMPUR, Aug 19 (Reuters) - Malaysia's Top Glove <TPGC.KL> expects demand to grow by 8 to 10 percent in the next two years and will raise its annual production capacity by 25 percent by May 2011, a senior company official said. The world's largest rubber glove maker by production capacity, is now seeing a normalization in demand as the flu outbreak is no longer a concern, executive director Lim Cheong Guan said. "With the normalization in the demand for gloves following the dissipating worries of H1N1 flu outbreak, we expect customers to replenish their orders following the lower rubber prices," Lim told Reuters via email. Lim said orders from the European and Latin America markets were slowing down temporarily due to their weakening currencies, although orders from the U.S., in particular North America, had been growing by more than 10 percent since early this year. A stronger ringgit will also hurt glove makers' profits as their products are sold in U.S. dollars. On Thursday, the ringgit <MYR=> touched a 13-year high at 3.12 to the dollar, its highest since October 1997. "Thus, any fluctuations in the currency will have an impact on our revenue and earnings in the short term," Lim said. Analysts say higher latex prices may also hurt rubber glove makers' bottom line, as customers would increase inventory holdings only when latex prices dip further. The price of latex, from which gloves are made, reached a high of 7.75 ringgit per kilogram in April this year. CAPACITY EXPANSION Rubber glove makers have embarked on aggressive expansion plans in recent years to ride on growing demand, prompting fears that supply may soon outstrip demand. Top Glove is currently constructing three new factories in Malaysia as well as putting up 88 additional production lines in existing plants in Malaysia and Thailand. This will raise the company's annual production capacity by 25 percent to 41.25 billion pieces of gloves by May 2011 coming from a total of 20 glove factories with 459 lines, Lim said. Top Glove, equipped with net cash of 300 million ringgit currently, made a net profit of 64.5 million ringgit in the third quarter, up 53 percent from a year earlier. Top Glove is expected to report a net profit of 263.5 million ringgit in 2010, against 169.2 million ringgit in 2009, according to 17 analysts polled by Thomson Reuters I/B/E/S. Shares of Top Glove have risen by 23 percent since the start of the year, outperforming the Malaysian benchmark's <.KLSE> 8.9 percent increase.