Record earnings for Hartalega in first quarter
But its shares succumb to profit taking
PETALING JAYA: Profit-taking shaved off some gains from Hartalega Holdings Bhd’s shares as investors took the opportunity to sell into strength even as the company announced a record performance for its first quarter period ended June 30.
Hartalega, the biggest nitrile glove maker in the world by market capitalisation, saw its shares fall by 56 sen to RM19.94 at its close yesterday.
It was the only odd one out among the other glovemakers, as it topped the losers list while the rest of the other glove makers made it to the top gainers list.
Market observers and a fund manager said the price action reflected some sort of profit-taking as the company’s shares had risen a lot since the Covid-19 pandemic started.
CGS-CIMB Research analyst Walter Aw who covers the company concurred, saying that it appeared to be profit-taking by investors.
“I am still going through their results now but it is quite likely profit-taking activities,” Aw told Starbiz.
The company announced its results yesterday which showed net profit rising by more than two fold year-on-year (y-o-y) to Rm219.72mil from Rm94.06mil in the same quarter a year ago.
Such a rise in the company’s earnings had already been anticipated by the market as the outbreak happened internationally since some months back.
Hartalega’s earnings per share (EPS) of 6.49 sen for its first quarter is already more than the halfway mark of its EPS in the whole of financial year 2020 of 12.88 sen.
Revenue for its second quarter, meanwhile, jumped by 43.74% y-o-y to Rm920.09mil.
Dividend per share announced for the quarter was 2.1 sen compared with 1.9 sen in the same quarter of the previous year.
In a statement, Hartalega said the strong performance was driven by improved revenue on the back of increased sales volume and higher average selling prices.
This was further supported by lower raw material and energy costs as well as its continuous cost optimisation initiatives, the company said.
“Market demand was exceptionally strong during the quarter due to the unfortunate Covid-19 pandemic. With a new wave of cases emerging in the US, Latin America and India, along with upticks in other countries across the world, this surge in demand growth is expected to continue in the coming years,” chief executive officer Kuan Mun Leong said.
“Due to the global shortage of gloves, average selling prices are expected to see upward revisions in the coming quarters, in line with prevailing market price.”
Moving forward, Kuan said the glove manufacturing sector is expected to undergo a structural step-up in demand on the back of increased glove usage from emerging markets, with low glove consumption per capita as well as heightened awareness of hygiene matters.
“As a result, overall projected demand growth is expected to outstrip supply for the next two to three years,” Kuan said.
Hartalega said it would continue to ramp up capacity expansion plans through its Next Generation Integrated Glove Manufacturing Complex (NGC).
For Plant 6 of the NGC, eight out of 12 production lines have been commissioned, while for Plant 7, the first production line is on track for completion by October 2020, it said.
All remaining examination glove production lines for Plant 7 are targeted to be completed by March 2021, it added.
“Meanwhile, for our next expansion phase of NGC 2.0, we aim to commission the first production line in the first half of 2022. The NGC 2.0 facility will provide an annual installed capacity of 32 billion pieces once completed,” Kuan said.
“With these plans in the pipeline, it will enable Hartalega to continue delivering gloves to frontliners across the globe without disruption, in addition to ensuring that we are well-equipped to cater to future demand growth,” Kuan added.