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Hartalega prospects strong as short-term glove demand to remain high — chairman

Hartalega prospects strong as short-term glove demand to remain high — chairman

02 Aug 2021

Hartalega Holdings Bhd executive chairman Kuan Kam Hon said prospects for the rubber glove manufacturer remain strong in the short term as glove demand is projected to remain high as the Covid-19 pandemic generates demand for gloves, which are seen as a crucial form of personal protective equipment to curb the spread of the pandemic.

Kuan said in a statement in Hartalega’s latest annual report that while demand for gloves is projected to remain high for the short term, such demand is expected to reach an equilibrium and average selling prices for gloves are subsequently expected to stabilise. 

“Nonetheless, we are confident that the group is well-poised to realise our aspirations for long-term growth, more so as we have a robust structure in place. Taking a leaf from our history, when Hartalega was first established more than three decades ago in 1988, there were many entrants coming into the glove manufacturing sector. 

“Today, only a handful have withstood the test of time, with Hartalega standing firm as a trusted leader in the industry, and we continue to leverage our proven track record.  Although in recent times, competition in the sector is intensifying with ambitious expansion plans by industry participants and new entrants coming into the sector, we are confident that we will be able to stay the course. 

“To effectively manage the risk of rising operating costs and raw material costs, we will continue to work closely with our suppliers. This will enable us to ensure sufficient supply of raw materials and achieve a cost pass-through mechanism to mitigate potential impact,” he said.

According to Hartalega’s website and Bursa Malaysia filing, Hartalega’s existing glove factories are located in Selangor within Sepang district and Bestari Jaya town. The facility in Sepang is known as the Next Generation Integrated Glove Manufacturing Complex (NGC), according to Hartalega’s website. 

Hartalega is also building new manufacturing facilities in Kedah. In a March 10, 2021 Bursa filing, Hartalega said the company through its wholly-owned subsidiary Hartalega NSM Sdn Bhd had on that day inked a sales and purchase agreement with Northern Gateway Free Zone Sdn Bhd, a wholly-owned subsidiary of Northern Gateway Sdn Bhd (NGSB), for the acquisition of approximately 250 acres (100ha) of land within the Kota Perdana Special Border Economic Zone in Bukit Kayu Hitam.

NGSB is a wholly-owned entity of the Minister of Finance Inc, according to Hartalega.

Hartalega said: “Concurrently, both parties (Hartalega NSM and Northern Gateway Free Zone) also signed an option agreement for Hartalega to purchase another 130 acres (520 ha) of land in the same location. The acquisition of 250 acres of landmarks Hartalega’s latest phase of growth, with an investment of RM7 billion to build 16 new manufacturing facilities over the next 20 years.”

In the annual report, Kuan said the remaining four lines of Plant 7 of the NGC are set to be completed by 2021 to increase Hartalega’s annual installed glove production capacity by 2.7 billion pieces a year.

He said the completion of Hartalega’s NGC 1.5 facility will increase the group’s capacity to 63 billion pieces of gloves a year.

“Subsequently, our expansion plans in Kedah will increase our annual installed capacity by another 80 billion pieces per annum. These expansion plans are aligned with our medium-term milestone to expand our annual installed capacity to 95 billion pieces by 2027. 

“As part of our longer-term strategy, Hartalega’s total capacity will increase to 143 billion pieces of gloves per annum with the completion of the Kedah facility,” he said.

At Bursa’s 12:30pm break today, Hartalega’s share price settled up one sen or 0.14% at RM7.05, valuing the group at about RM24.18 billion.

Hartalega has 3.43 billion issued shares, according to the company’s annual report.

Source: The Edge Markets

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