Hartalega sees margin improvement of up to 7% on increased capacity

by **Cals** Thu 12 Jun 2014, 02:57

Business & Markets 2014

Written by Charlotte Chong of theedgemalaysia.com

Wednesday, 11 June 2014 10:15

UALA LUMPUR: Hartalega Holdings Bhd, the world’s largest producer of nitrile gloves, sees margin improvement of 6% to 7% on the back of increased production capacity, with the commencement of its RM2.2 billion integrated glove manufacturing complex (NGC) in the fourth quarter of this year, said a source.

He told The Edge Financial Daily yesterday that there will be six plants and 72 production lines running at the NGC, which is located on a 112-acre (45.32ha) site in Sepang.

“The production capacity will double to 24 billion pieces a year from 12 billion pieces currently... The average output per line is about 45,000 pieces per hour from the current average of 28,000 pieces,” he said.

On the back of the improved production capacity, the company would be able to reduce its manual labour by 18%.

“The improvement of up to 7% margin would put them in good stead to compete with other companies such as Supermax Corp Bhd and Kossan Rubber Industries Bhd,” he added.

Hartalega’s fastest production lines are currently able to churn out 45,000 pieces of gloves per hour, while its peers operate their fastest lines at an average of about 33,000 pieces of gloves per hour.

The source said the group also plans to launch a new glove product in Australia next month.

The glovemaker reported a 21.1% drop in net profit to RM62.29 million in its fourth financial quarter ended March 31, 2014 (4QFY14) from RM49.16 million in the previous corresponding quarter.

The drop was attributed to lower operating margins of 23.9% from 29.5% in 4QFY13 due to a reduction in the average selling price, rise in electricity and maintenance costs, as well as higher staff costs due to recruitment for its NGC.

Revenue however came in 3.93% higher at RM280.37 million from RM269.77 million.

This article first appeared in The Edge Financial Daily, on June 11, 2014.