PETALING JAYA: Hartalega Holdings Bhd expects stronger revenue growth this year, surpassing its average year-on-year revenue growth of 28%.
The world’s largest nitrile glove maker, which has been enjoying an average year-on-year revenue growth of 28% for the last 13 years, has attributed the stronger growth to the expansion of its production capacity.
Managing director Kuan Mun Leong told StarBiz that he anticipated higher revenue growth this year on the back of higher capacity from its new plants at the Next Generation Integrated Glove Manufacturing Complex (NGC) facilities in Sepang.
The NGC facilities will have a total of six plants by 2021.
He also expected to maintain strong growth in revenue for the next five years.
“We have completed the construction of three plants which are running currently. We have also commissioned the fourth. Each plant will have 12 lines.
“For the fourth plant, there are five lines running out of the 12 lines. Construction work has started for the fifth plant and is targeted to be operational by June next year. The sixth and final plant is targeted to be onstream by 2021,” he said.
At an investment of RM2.2bil, the NGC will comprise six state-of-the-art manufacturing plants housing 72 of the most technologically advanced production lines in the industry. Upon completion, the NGC will see Hartalega’s total installed capacity increase substantially to 42 billion pieces per annum from the current 29 billion pieces.
Over the next five years, Hartalega aims to have an average growth of 15% per annum in terms of manufacturing output via capacity expansion.
On the surge of demand for Malaysian gloves as a result of the shortage of supply in China, Kuan said the production of vinyl gloves in China has been badly hit and many buyers had decided to switch to latex or nitrile gloves.
The supply disruption resulting from China’s fight against polluting industries contributed to a surge in demand for rubber gloves produced by Malaysian companies.
He said those badly hit would either close down or upgrade their facilities to comply with China’s environmental regulation relating to pollution.
Kuan said he expected some normalisation in the second half of next year where glove prices in China may move up again due to rising costs and this would provide Malaysian glove makers some advantage in terms of a level playing field.
Malaysian Rubber Glove Manufacturers Association president Denis Low Jau Foo told StarBiz recently that the reduced supply of vinyl gloves from China was a boon for local manufacturers.
He said total export value of rubber gloves from Malaysia was expected to increase by about RM3bil this year to RM16.2bil. He also said the growth could be sustained and improved mainly due to the closure of some vinyl factories in China.
China produced about 160 billion pieces of vinyl gloves per year.
As for overseas expansion, Kuan said Hartalega was spreading its wings to markets in eastern Europe, the Middle East and Japan.
As for the United States and other markets like Europe, the Asia-Pacific and Australia, the company operates as an OEM glove producer to international brands. But in China and India, he said the company adopted a different strategy in that it operates and produces under its own brand name.
On the likelihood of diversification to rubber products, he said the company would not undertake such an exercise. “We don’t plan to diversify. This is because our profit margin is double than the industry average.
“Furthermore, we have competitive advantage in terms of strength and there is good potential for future growth in the glove business,” Kuan added.
For its first quarter ended June 30, 2017, Hartalega recorded a higher profit after tax of RM96.4mil, reflecting a 71% jump from RM56.3mil in the same quarter last year.
The group also registered strong revenue growth, with a turnover of RM601.0mil in its first quarter ended 30 June 2017, a 49.6% jump from RM401.8mil in the same quarter last year.