Hartalega earnings soar on strong demand

Additional production capacity also contributes to better results

PETALING JAYA: Glove maker Hartalega Holdings Bhd started off its financial year on a strong note, registering a 30% year-on-year growth in net profit to RM124.87mil for the first quarter ended June 30.

The growth was driven by favourable demand and additional production capacity.

The lower costs of nitrile, chemicals and upkeep of plant and machinery also contributed to the higher pre-tax profit.

The better profit was on the back of an improved revenue of RM706.35mil, which saw a 17.5% increase from the corresponding period last year.

In a statement, Hartalega managing director Kuan Mun Leong said the performance was driven by organic growth via a higher sales volume of 20.5%.

He said this was achieved on the back of robust demand growth for nitrile gloves, coupled with continuous expansion in production capacity by its next-generation integrated glove manufacturing complex (NGC).

“As we continue to expand our production capacity via the NGC, we are mindful of the importance of maintaining healthy market supply and demand dynamics, which are currently well-balanced.

“Moving forward, we remain positive on the group’s prospects in the mid to long term, premised upon our highly efficient technology,” said Kuan.

Prospects for the rubber glove manufacturing sector remain strong, with increasing demand arising from switching trends to nitrile gloves.

Currently, nitrile gloves account for 60% of Malaysian rubber glove export.

In meeting the rising demand, the Hartalega NGC began commissioning Plant 5 in August 2018 with construction of Plant 6 to follow, which will each have an annual installed capacity of 4.7 billion pieces.

The new Plant 7 is also in the expansion pipeline, with an annual installed capacity of 2.6 billion pieces, tailoring to small orders and specialty products.

The increasing contribution of NGC to Hartalega’s revenue will help to consolidate margins and contribute further to group earnings.

Kuan said Hartalega expected its latest innovation, the world’s first non-leaching antimicrobial glove, to contribute to its growth.

“Launched in London in May 2018, we have begun taking sales orders for the new glove in the European Union and are in the midst of securing Federal Drug Administration approval to enter the US market.

“The glove is also competitively priced to encourage take-up and remove barriers to access,” he said.

No dividend was proposed or declared for the quarter under review.

However, on July 3, 2018, the board of directors had proposed a final single-tier dividend of 2.2 sen per share in respect of the financial year ended March 31, 2018, subject to shareholders’ approval at an AGM scheduled for Aug 24.

If the final dividend is approved, it will be paid on Sept 28 to the depositors registered in the Record of Depositors at the close of business on Sept 14.

In a separate announcement, Hartalega told Bursa Malaysia that recurrent related-party transactions (RRPTs) had been entered into between Yancheng MUN Medical Equipment Co Ltd and MUN Health Product (India) Pte Ltd, both of which are subsidiaries of Hartalega.

The transaction amount between the two companies from Oct 1, 2017 to June 30, 2018 is RM22.83mil.

Hartalega said the RRPTs are necessary for the day-to-day operations of the group and are intended to meet the business needs on the best possible terms.

“The RRPTs are made in the ordinary course of business at arm’s length and on normal commercial terms, which are not more favourable to the related party than those generally available to the public.

“The RRPTs are not detrimental to the interest of the minority shareholders,” it said.