Hartalega unfazed by China firms’ Asean expansion

Hartalega CEO Kuan Mun Leong.

KUALA LUMPUR: The prospect of Chinese glove makers venturing into the Asean region will not deter Hartalega Holdings Bhd from strengthening its position as the largest producer of nitrile gloves in the world.

Chief executive officer Kuan Mun Leong said some Chinese glove makers are set on expanding into the region and have already bought land in South-East Asia.

“The US tariffs imposed on gloves exported from China have led them to look elsewhere to expand their capacity. If there were no tariffs, they wouldn’t do this.

“On the Malaysian side, it is positive for us but for them, it is something they have to mitigate,” he told reporters after the group’s AGM here yesterday.

“There may be a surge in capacity which will impact the supply and demand equilibrium.

“However, we need to build capacity for the United States outside of China. Hartalega should be in a better position to compete with Chinese producers because the playing field will be very different from right now, especially since China has got lower energy costs,” he said.

Hartalega’s executive chairman Kuan Kam Hon said that when Chinese companies enter the region, overall capacity is expected to increase.

“They are so used to large capacities. They are already starting out in Indonesia and Vietnam. So these are areas and capacities that we have not anticipated before the imposition of the tax on products from China,” he said.

Kam Hon said at the moment, the tariff being imposed by the United States on China-made gloves was 7.5% but will soon rise to 35% by 2026.

“We are not concerned by them, even if they go into other countries in the region. We know how to operate under the environment, the culture and the people, which is unknown to them.

“They are working on the basis of what they have experienced in China. But here, it’s a totally different kind of workforce,” he said.

Mun Leong said labour has continued to be a concern for the company, particularly with the ban on foreign labour.

“We do not have a shortage of foreign labour because we hired well ahead of our capacity. We have more local workers right now, but there are issues of job abandonment and absenteeism. Foreign workers are more reliable, they are under contract and they want to work to be able to send the money back to their home countries.

“This is something we are mitigating right now,” he said, adding should the ban be lifted, Hartalega will look to hire more foreign labour.

He also said the stronger ringgit will impact the group, but it would pass the cost on to customers as prices are quoted on a monthly basis.

“The pricing this month that we quoted to the customers has factored in the strengthening of the ringgit. We anticipate the average selling prices to trend up,” he said.

Meanwhile, Hartalega remains optimistic about the next 12 months and earmarked RM300mil in capital expenditure, with RM170mil to be used as investment for new capacity.

“The rest will be used for the automation upgrading of production lines to make them more advanced.

“We hope to trim down manual labour to the tune of 15% to 20%. The automation will take two years,” he said.