PETALING JAYA: Hartalega Holdings Bhd
is anticipated to see improved earnings, going forward, on the back of rising sales and improving average selling prices (ASP).
Maybank Investment Bank Research (Maybank IB) said the world’s largest nitrile medical glove producer’s plant utilisation rate continues to improve with higher sales orders, which is now running at 85%.
“ASP outlook is also improving as Hartalega has managed to fully pass on higher raw material costs to its customers.
“Given the tight supply, ASP could improve further if demand surges. Hartalega’s order lead time has now increased to two-to-three months, compared to China glove makers’ three-to-six months,” said the research house in a report.
While Hartalega’s new lines (of over two billion pieces of gloves) are ready for commencement, Maybank IB said the company may not be able to boost its capacity further (in the event of a sudden surge in demand) due to the hiring freeze on foreign workers.
“In our view, this limited capacity/capacity expansion will help to support short-term pricing.”
Additionally, the research house said it expects raw material costs to start trending down after the wintering season of natural rubber from May 2024 onwards.
“With stable ASP, lower raw material costs and better cost efficiency post the decommissioning of its Bestari Jaya facilities, as well as the absence of additional operating costs from the relocation of production lines to its NGC plant (from Bestari Jaya), Hartalega should be able to report stronger earnings performance in the coming quarters.
“The worst is over and the glove sector is poised to recover from the nearly three-year long sector downturn,” said Maybank IB.
The research house said it continues to like Hartalega for its hands-on management, proven track record in technology and product quality, as well as its strong balance sheet.
In its fourth quarter ended March 31, 2024, Hartalega posted a net profit of RM15.12mil, a stark difference to a net loss of RM319.85mil in the same quarter in 2023. The group’s earnings per share rose to 0.44 sen compared to a loss of 9.36 sen per share previously.
Revenue rose to RM529.83mil from RM517.55mil over the comparative quarter.
According to Hartalega, the improved performance for the quarter was primarily due to higher ASP, mainly attributable to favourable foreign currency exchange movements.
For the full financial year (FY24), the group’s net profit swung into the black with RM12.72mil, compared to a net loss of RM235.14mil in FY23.
It said the positive bottom line was supported by higher interest income, foreign currency exchange gains and reversal of certain provisions no longer required during the period under review.
This was in addition to the absence of a one-off impairment loss of assets amounting to RM347mil relating to decommissioning of a facility in Bestari Jaya, Selangor.
Group revenue in FY24, however, fell to RM1.84bil from RM2.41bil in FY23.
