Group chairman Kam Hon said the average selling prices of gloves have likely bottomed, given the current industry dynamics.
KUALA LUMPUR: Hartalega Holdings Bhd
is not expecting any further write-off that would unexpectedly impact its bottom line, moving forward.
The world’s largest manufacturer of nitrile gloves said the market remains challenging and any bottoming out would likely only come in the latter part of 2024, at the earliest.
“Today the market demand is still depressed, as there are still a lot of stocks in the inventory (client-side) and these stocks are due to expire.
“These stocks are being released to the market by the Western governments at a lower price,” chief executive officer Kuan Mun Leong said after its AGM yesterday.
“We don’t see an uptick in demand for 2023 (calendar year) because of this ongoing phenomenon. We expect a recovery in 2024, running into 2025.”
Kuan said the current monthly import data of gloves that Hartalega has is 15 billion pieces per month (bppm), which, if annualised, is at 180 bppm.
“Prior to the pandemic, the world’s normal global consumption was at about 300 bppm,” he added.
This implies that the importation of gloves by overseas clients is at an extremely low level, Kuan said.
“We believe this has bottomed due to the release of the soon-to-expire stocks on the market. From this we know that we are at the bottom and a recovery will come later,” he said.
Hartalega recently announced the decommissioning of its Bestari Jaya facility to improve operational and cost efficiencies.
Due to this, it recognised a one-off impairment of RM347mil, which resulted in a full-year net loss of RM239mil for the financial year 2023 (FY23).
Excluding the one-off impairment, Hartalega said it registered a full-year net profit of RM108mil for FY23.
“There is another final RM23mil in impairments on provisions for early terminations such as contracts we had signed with vendors.
“After this, there will be no more provisions. In fact, RM23mil is a very conservative figure and I don’t think we’ll end up with that. It will be recognised in FY24,” Kuan said.
While it had reported a net loss of RM51mil in its first quarter, Kuan highlighted that the group has a healthy cash position of RM1.6bil as at March 31.
Hartalega’s capacity utilisation rate now is 40% to 50%.
Meanwhile, group chairman Kuan Kam Hon said the average selling prices of gloves have likely bottomed, given the current industry dynamics.
The group, which is supported by its cash holdings, is looking at potential acquisitions to diversify its business portfolio.
“We are not looking at acquisitions within the rubber glove industry, since we already have an excess of assets.
“But we are seriously looking to acquire other related businesses. This aligns with our diversification plan,” Kam Hon said.
Kuan emphasised that Hartalega is in the healthcare sector and is interested in businesses within the industry.
“We don’t have anything serious in sight yet but we are looking. We are extremely prudent and careful. Any acquisition has to be value accretive to the core business and we are very disciplined on this.”
He said he group’s cash holdings will be well guarded to ensure its security and will primarily be used to invest in people, as this will take the group to the next level of growth.
