* Top Glove will hike price to protect profit margins
* To hedge ringgit rise by sourcing U.S. dollar Thai latex
* Glove makers suffer sell-off due to ringgit, latex costs (Adds share prices, details)
By Soo Ai Peng
KUALA LUMPUR, April 14 (Reuters) - Malaysia's Top Glove (TPGC.KL: Quote, Profile, Research) can overcome the impact of rising raw material costs and foreign exchange fluctuations by raising product prices, according to a senior company official.
Top Glove, the world's largest rubber glove maker by production capacity, sees the recent sharp gains in rubber prices and the ringgit currency as short-term fluctuations and will pass through any impact to its customers, said executive director Lim Cheong Guan.
"Any impact will be short-term. Gloves are a necessity in the medical industry, any price increase is negligible to the end users compared with the total medical cost," Lim told Reuters via email.
Shares of rubber glove makers have suffered heavy selling pressure this week, shedding as much as 8 percent in the past five trading days, on concerns the sharp rise in rubber prices as well as the fast appreciation of the ringgit currency will eat into their profit margins.
Tokyo rubber futures this month hit a 20-month high on the back of strong oil prices and tight physical supply. [ID:nTOE63B05S]
The ringgit MYR= is up about 7 percent year-to-date, making it the best performing Asian currency [ID:nSGE63B076]. A stronger ringgit will hurt glove makers' profits as their products are sold in U.S. dollar.
Malaysian rubber glove makers supply more than 60 percent of the world's rubber latex gloves, which have seen a spike in demand following the outbreak of the H1N1 flu in 2009.
By 0335 GMT, shares of Top Glove were down 1.4 percent. Smaller rivals Supermax (SUPM.KL: Quote, Profile, Research) was up 1.5 percent and Kossan Rubber (KRIB.KL: Quote, Profile, Research) added 0.3 percent.
Apart from raising glove prices, Top Glove can hedge against rising ringgit by sourcing latex concentrate from Thailand which is transacted in U.S. dollar, said Lim.
The price of latex, from which gloves are made, will likely come down in May when the current supply squeeze resulting from dry weather conditions eases, he said.
Rubber supply in Thailand and Malaysia, the world's biggest and third-biggest producers respectively, has gradually declined since the dry season began in late February.
Lim also brushed off market worries that the rubber glove industry is adding too many new plants too fast.
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.
"Additional glove supply will come in gradually and if there is any oversupply, manufacturers will revise its expansion plan in order not to affect the supply demand situation," he said.
(in.reuters.com)
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