Hartalega 1Q results hit hard by headwinds

PETALING JAYA: Hartalega Holdings Bhd will continue to emphasise cost management, efficiency improvement and automation initiatives across its operations amid the challenging business landscape to ensure business sustainability and adaptability.

In a filing with Bursa Malaysia, the group said several headwinds were expected to remain due to the Russia-ukraine conflict and lockdowns in China. These events had caused further strain on global supply chains that led to higher commodity and raw material prices.

“The glove sector is faced with higher operating costs due to rising inflationary pressure resulting from the higher electricity and natural gas tariffs, coupled with the new minimum wage policy in Malaysia which came into effect on May 1, 2022.

“In addition, the sector is also experiencing escalating market competition exacerbated by the continued oversupply situation in the global glove industry,” the group said in a statement.

The group’s net profit for its first quarter ended June 30, 2022 fell 25 times to Rm88.28mil while revenue slid five-fold year-on-year to Rm845.67mil.

On a per share basis, Hartalega’s earnings dropped to 2.58 sen in the current quarter from 66.08 sen in the previous corresponding period.

The lower revenue was mainly due to the normalising of the average selling price (ASP) and a decrease in the sales volume by 28%, as compared to the previous quarter when both the ASP and sales demand hit a record high during the pandemic period.

In addition to the significant reduction in revenue, performance in the current quarter was affected by higher energy and labour costs due to the increase in natural gas tariffs and the minimum wage implementation.

The board of directors announced an interim dividend of 3.5 sen per share for the current quarter, payable on Sept 29, 2022.

Hartalega CEO Kuan Mun Leong said as ASP and demand continued to normalise, as reflected in the current quarter’s results, the company”s financial performance was further impacted by the higher operating cost environment amid rising inflationary pressure resulting from the higher electricity and natural gas tariffs, as well as the new minimum wage policy implemented in May 2022.

“In addition, heightened market competition was further intensified by the ongoing oversupply situation in the global glove sector. In the short term, external headwinds are expected to persist.

“Nevertheless, the group remains focused on strengthening long-term prospects,” he said in a statement.