Hartalega to see improved turnover in FY18
KUCHING: Hartalega Holdings Bhd ( Hartalega) is poised to witness a better revenue in financial year 2018 (FY18) ending March 2018.
Following a company briefing, the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) expected Hartalega to record better revenue in FY18 after the company has gone through a period of consolidation and various hikes in production costs last year.
The improvement in turnover is expected to be driven by two factors, which are the improvement in demand for gloves and the increase in average selling prices (ASPs).
“The improvement in demand will be due to the expected completion of Hartalega’s manufacturing plant number three at Next Generation Integrated Glove Manufacturing Complex ( NGC) which will have increase the production of 4.7 billion pieces of gloves capacity annually,” MIDF Research said. “Meanwhile, the increase in ASPs is due to the strengthening of the US dollar against the ringgit and fluctuation of raw material prices.”
In the meantime, the research firm gathered that the company has on average increased ASPs by more than 10 per cent since January 2017 to accommodate rising input prices.
Besides that, MIDF Research also expected the increased in demand to be derived from the shift in orders from China to Malaysia due to China’s recent participation in the Paris Climate Agreement back in November 2016.
The scenario has resulted in increase in price of gloves produced in China, it observed, especially for vinyl plastic gloves as the factories try to comply with environmentally-friendly practices as agreed in the Paris Climate Agreement.
In particular, the situation has caused the price of vinyl plastic gloves to increase by approximately more than 30 per cent which drove the switch from vinyl plastic gloves to rubber gloves.
On another note, MIDF Research gathered that the commissioning of the production lines at Hartalega’s NGC Plant Three is well on track with more than one line commissioned per month.
Thus, the research firm anticipated for the full commissioning of Plant Three to be on schedule by the second half of 2017 (2H17).
Moreover, MIDF Research expected the utilisation rate of the plant to stabilise at around 85 per cent throughout the year due to the expected improvement in demand after taking into consideration new production capacity.
The research firm opined that the operating environment in the rubber gloves sector will be a volume game as price competition between the glove makers has abated.