PETALING JAYA: Glovemaker Hartalega Holdings Bhd is cautiously optimistic about being a beneficiary of the ongoing US-China trade war, even as China glove manufacturers divert from the US market.
According to managing director Kuan Mun Leong, it is difficult to ascertain the impact of the trade war on Hartalega’s business at present as market overreaction to the tariffs have yet to be factored in.
“Demand from the US market had shifted from China to Malaysia before the tariffs were imposed. We saw strong growth from the US last October.
China glove manufacturers are offloading their gloves into other parts of the world, such as the European region, to avoid the tariffs, ” said Kuan, who was speaking after the group’s AGM yesterday.
Kuan expects Hartalega’s sales volume to pick up in the second half of the financial year, on the back of an increase in global demand for rubber gloves and higher production volume.
“Since August, we are operating at a utilisation rate of 95% as compared to the previous rate of 88%, ” he said.
The US had imposed a 25% tariff on non-medical gloves imported by China in May.
Beginning Sept 1, medical gloves produced in China are subject to an additional 10% tariff.
Kuan noted that given the additional tariff, the price difference between PVC gloves and nitrile gloves in the US have narrowed, making nitrile gloves more competitively priced.
This could potentially result in buyers shifting to nitrile gloves, given its higher quality.
The bulk of China glove manufacturers produce PVC gloves, which are priced lower.
Going forward, Hartalega will continue to focus on the US, which remains as its core export market.
Hartalega’s exports to the US comprise 54% of its total sales for the financial year ended March 31,2019.
This is followed by Europe at 25% revenue contribution and Asia Pacific at 18%.
Some 90% of the group’s glove exports to the US are for the medical segment.
In terms of Hartalega’s expansion plans, the next generation integrated glove manufacturing complex (NGC) is expected to be completed and fully operational by 2021.
Following the completion of Plant 6 and 7, Hartalega will have a production capacity of 44 billion pieces of gloves per annum, an increase from the current 34 billion pieces of gloves per annum.
“Beyond NGC, we are on the lookout for new parcels of land for future expansion, ” said Kuan.
Hartalega posted a 24% year-on-year decline in net profit at RM94.06mil for its first quarter ended June 30, on the back of lower sales volume as well as higher packaging, electricity, heat and labour costs.