Excerpts from the interview with Hartalega Holdings group MD Kuan Kam Hon.
STARBIZ: You are expanding capacity by more than 80% this financial year and by another 50% next year. The nitrile market is not growing at this pace. Who will you take market share from?
Kuan: I'm taking market share from natural rubber (gloves). There is a switch, especially in the US, from natural rubber to nitrile (synthetic rubber) gloves because there are people with allergies to natural rubber gloves.
Like the John Hopkins hospital in the US, it has stopped the use of natural rubber gloves; they don't know who has the allergy, so they've stopped using it altogether.
Hartalega’s lab dipping simulator shows the group’s focus on technologyThis is a trend in hospitals and clinics in the US, that's why the demand for nitrile gloves is growing very fast.
StarBiz: Other glove manufacturers are also expanding their nitrile glove capacity. Won't they erode your high net profit margin of 14%?
Kuan: My margin is not derived by selling nitrile gloves at a high price. The key is production efficiency.
Kuan Kam Hon at the group's glove dipping lineOur new lines of machinery produce 30,000 pieces of nitrile gloves an hour. Nobody else has the technology for automated stripping of gloves from the moulds.
It's impossible for workers to take out the gloves when the machine is running at that speed. The profit margin we have is not available to others at their current level of technology.
StarBiz: You must have a big team of engineers.
Kuan: I love engineering and we've built a large engineering team that keep improving machine and product designs.
When we built plant one, the average line speed was 8,000 pieces of gloves an hour. This was increased by 50% to 12,000 pieces in plant two, and by 2006/07 when we built plant three, we can produce 30,000 pieces an hour.
We're a company that is not afraid of one-time costs in machinery. Our line costs RM5mil to RM6mil each. Others make do with lines of RM2mil, or even three-quarters of a million for a low speed line.
StarBiz: Has the cost for the new plants gone up?
Kuan: Plant four costs about RM100mil but that's close to completion. Plant five was to cost about RM120mil but it has increased to RM150mil. We'll stagger the financing for that.
All our plants are in Batang Berjuntai where we've built on 13 acres but we have a total of 22 acres there.
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