PETALING JAYA: Hartalega Holdings Bhd
will be decommissioning its Bestari Jaya facility and consolidating operations at its Next Generation Integrated Glove Manufacturing Complex (NGC) in Sepang as it embarks on a rationalisation plan.
The glove maker said the exercise is expected to incur an impairment loss of RM347mil in financial year 2023 (FY23) and a further provision for retrenchment costs and contract obligation expenses amounting to about RM70mil in FY24.
The decommissioning of the Bestari Jaya plant, which consists of four production plants with 40 production lines, is expected to be completed by end-2023.
Hartalega said the rationalisation exercise is part of its five-year strategic plan, which aims to reinforce its business resilience and long-term sustainability in view of the current challenging operating landscape.
“Given the competitive business environment, the company is of the view that it is more strategic and viable in the long term to consolidate operations at the NGC facility.
“Compared with its state-of-the-art production lines at the NGC facility, the Bestari Jaya facility is less efficient and restricted by older technology, as well as generating higher energy and labour cost, in addition to higher maintenance costs due to the age of the facility,” it said in a statement.
The group added that the NGC facility had the capacity for future expansion as the group continues to progress strategically in line with prevailing market supply-and-demand dynamics.
Upon completion of the decommissioning, Hartalega expects a reduction in operating cost and depreciation, which will directly benefit its bottom line.
Hartalega chief executive officer Kuan Mun Leong said the group was committed to treating all its employees fairly and with respect as it undertakes the rationalisation exercise.
Over the course of the decommissioning, he said measures have been put in place to provide opportunities for redeployment to its NGC facility, competitive severance packages and outplacement support.
He added that a helpdesk to address employee concerns and queries as well as human resource assistance and counselling for affected employees will also be provided.
Hartalega posted a net loss of RM31.91mil or loss per share of 0.93 sen for the third quarter ended Dec 31, 2022 versus a net profit of RM259.06mil or earnings per share (EPS) of 7.58 sen recorded in the previous corresponding quarter.
Revenue in the quarter under review was 54% lower year-on-year at RM461.84mil as sales eased due to inventory drawdown by glove traders.
Over the nine-month period to Dec 31, 2022, Hartalega posted a net profit of RM84.71mil or an EPS of 2.48 sen versus the RM3.43bil net profit or EPS of RM1.04 in the previous corresponding period.
Revenue for the nine months stood at RM1.89bil or 73% lower y-o-y compared with the RM6.92bil recorded previously.
