Hartalega 4Q earnings hit by prosperity tax

Hartalega chief executive officer Kuan Mun Leong said the group’s bottom line for the fourth quarter FY22 was a result of the normalisation of ASPs of gloves and normalised demand.

PETALING JAYA: Hartalega Holdings Bhd posted a net loss of RM197.90mil in the fourth quarter ended March 31 from net profit of RM1.12bil a year ago, mainly due to the provision of Cukai Makmur or prosperity tax.

In a filing with Bursa Malaysia yesterday, the glove maker said its revenue for the quarter declined by 58% to RM968.69mil compared with RM2.31bil previously, dragged by lower average selling price (ASP) of gloves.

Hartalega is the world’s largest nitrile glove producer with production capacity of 44 billion gloves per year.

Cukai Makmur is a one-off tax introduced by the government under Budget 2022. Companies’ earnings of above RM100mil will be taxed at a rate of 33% instead of the blanket 24% rate previously.

Cumulatively, for the full year of the financial year ended March 31, Hartalega’ net profit jumped 11.8% to RM3.23bil from RM2.8bil a year earlier driven by higher revenue.

Its revenue for the period rose to RM7.89bil compared with RM6.7bil previously driven by higher ASP in the first half of FY22, after offsetting the impact of reduction in sales volume of 22%.

Hartalega declared a third interim single-tier dividend of 3.5 sen per share for its FY22, with the entitlement date on May 26.

Hartalega building

In a separate statement, Hartalega chief executive officer Kuan Mun Leong said the group’s bottom line for the fourth quarter FY22 was a result of the normalisation of ASPs of gloves and normalised demand.

“Nevertheless, as we look towards FY23, we expect prospects to remain, even as we enter into the endemic phase.

“For the glove sector, the current ASP seems to have bottomed out and the opening of international borders and easing of travel restrictions is expected to relieve the current shortage of workers, which will be of benefit to Hartalega,’ he said.

Kuan said the group would continue with its capacity expansion as demand for gloves will continue to grow led by emerging markets with low glove consumption base, as well as increased awareness on hygiene among healthcare practitioners post-pandemic

To this end, he said Hartalega’s Next Generation Integrated Glove Manufacturing Complex (NGC) 1.5 expansion is on track.

“We target to gradually commission the first production line by the fourth quarter of 2022. The pace of commissioning for NGC 1.5 will depend on the prevailing market situation moving forward,” he added.

Kuan said Hartalega continues to face external pressures, including the ongoing Russia-Ukraine conflict and the lockdown in major cities in China resulting from the new wave of Covid cases.

“It is expected to have repercussions on the already strained global supply chain, leading to rising global commodity and raw material prices.

“Additionally, the recent implementation of the new minimum wage policy in Malaysia is likely to result in higher operating costs for the manufacturing sector,” he said.

“Amid this challenging backdrop, we are focused on cost optimisation, continuous efficiency improvement and automation initiatives across our operations to ensure the sustainability and resilience of the group,” he added.