Hartalega allocates RM630mil capex

Hartalega's managing director Kuan Mun Leong shows 'First-of-its-Kind Glove Manufacturing Facility' during a media visit to the factory yesterday. - The Star

SEPANG: Hartalega Holdings Bhd, the biggest rubber glovemaker by market capitalisation, will invest more money for expansion with a RM630mil allocation for capital expenditure for the next three years.

The company’s managing director Kuan Mun Leong continues to be optimistic on the prospects of the rubber glove industry, and expects the demand outlook to soon recover and favour suppliers.

“The RM630mil is for Plant 6 of the next-generation glove manufacturing complex (NGC) and also Plant 7. Plant 6’s first line will start operations in the first quarter of 2020, while Plant 7’s first line is targeted for the second half of 2020. We plan to complete Plant 7 by the financial year 2022,” Kuan said at a media tour of the company’s factory yesterday.

He is also pinning his hopes on the company’s patented anti-microbial gloves, which have just been introduced, to spur demand.

Hartalega is now running at an 85% capacity utilisation rate, with the biggest production now being focused on nitrile gloves, he said.

The company, which is currently producing some 34 billion pieces of gloves per year, will see its production rising to 42 billion pieces in the next three years with this expansion plan.

“We have a growth plan in place and have set aside RM630mil for Plant 6 and Plant 7 NGC. Beyond this, we are also scouting for new land and would like to focus our expansion in Malaysia. We will continue to grow,” he said.

In his earlier corporate presentation to the press, Kuan said that per capita consumption of rubber gloves in the large populous developing economies such as China and India has the potential to grow further.

“Per capita consumption in the highly populous economies is still very low compared to the developed economies. This represents an opportunity for market growth. If there is any trigger point such as increased hygiene awareness, the number would be even higher than our projected 8%-10% growth per year,” he said.

Kuan said the concerns of a slight oversupply situation, which originated from a clampdown in production in China, had created a disruption in mainly PVC and nitrile gloves to a smaller extent.

“It started in the year 2017 when there was a lot of clampdown on glove factories in China, as they were trying to curb pollution. A lot of stop orders were issued, which created disruption. Nitrile glove production in China is still very small,” he said.

“This caused buyers to source more gloves in Malaysia, and suddenly in 2018, all the glove suppliers had very good business. So, when business is good, we put in place very aggressive expansion plans,” he added.

He said factories in China resumed operations at end-2018, which caused supply to move ahead of demand slightly in the beginning of the year.

“But this is not cause for concern, as global glove consumption continues to grow. And the big companies have delayed our capacity expansion. So, now we are seeing that the market is coming back to equilibrium. In fact, we are seeing a pick-up in sales in the third and fourth quarter of this year. We will only be worried if the market is stagnant, but the market continues to grow,” Kuan said.

To modernise its factories, Hartalega is planning to invest RM115mil in the deployment of Industry 4.0 at its plants over the next three years.

“The Internet of Things (IoT) is part of the Industry 4.0 initiative. What we strive to achieve is to have a totally connected smart factory. We want to connect all our activities, be it related to glove production or business processes: these will be connected to computer systems. These will then use data analytics and AI technology to help us make some decisions. This is our ultimate aim. This is a long-haul project and will take eight years to get there. In the next three years, we are focused on the fundamental Industry 4.0 technologies,” he said.

All these technologies would help reduce manual unskilled labour by about 18% in three years.

“We have manual packers but the robotic packing systems will replace the packers, while some of the IoT technologies will help us reduce manual monitoring of the production plant,” he said.

On another matter, Kuan said the recent gas tariff hike would have some impact on its margins, but it would not be a significant one.

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