Hartalega 1Q net profit plunges 96.1% on lower ASP

by S BIRRUNTHA / Pic by BERNAMA

HARTALEGA Holdings Bhd’s net profit for the first quarter ended June 30, 2022 (1Q23), plunged 96.09% to RM88.28 million from RM2.26 billion a year ago, dragged by a significant reduction in revenue as glove average selling price (ASP) and sales volume have declined post-Covid-19 outbreak.

In a filing to Bursa Malaysia today, the rubber glove manufacturer said performance in 1Q23 was also affected by higher energy and labour costs due to the increase in natural gas tariffs and minimum wage implementation.

The group’s quarterly revenue fell 78.33% to RM845.67 million from RM3.9 billion previously.

“The lower revenue was mainly due to the normalising of the ASP and a decrease in sales volume by 28%, compared to 1Q22 when both the ASP and sales demand hit a record high during the pandemic period,” it said.

As a result, Hartalega registered lower earnings per share (EPS) of 2.58 sen for the period compared to 66.08 sen a year earlier.

The group said no dividend was proposed or declared for the current quarter under review.

On a quarterly basis, Hartalega said its revenue decreased by RM123 million or 12.7% in 1Q23 compared to the preceding 4Q22.

“Profit before tax for the quarter (1Q23) decreased by RM83.9 million or 38.5% to RM134.1 million compared to 4Q22,” the group said.

Moving forward, Hartalega said the glove sector is faced with a higher operating cost due to rising inflationary pressure resulting from the higher electricity and natural gas tariffs, coupled with the new minimum wage policy in Malaysia which came into effect on May 1, 2022.

It added that the sector is also experiencing escalating market competition exacerbated by the continued oversupply situation in the global glove industry.

“Notwithstanding, the glove sector is expected to see a structural step-up in demand in the longer term with increased glove usage in emerging markets that have a low glove consumption base.

“In addition, the increase in demand is also expected with higher awareness of hygiene and health consciousness among healthcare practitioners post-pandemic,” it added.

Premised on this view, Hartalega said the group will continue with its Next Generation Integrated Glove Manufacturing Complex 1.5 expansion plan.

It noted that, however, commissioning will depend on the prevailing market supply and demand dynamics.

Meanwhile, Hartalega said to ensure business sustainability and adaptability amidst the more challenging business landscape, the group will continue to emphasise cost management, efficiency improvement and automation initiatives across its operations.

It will also continue to focus on social compliance in line with its role as a founding member of the Responsible Glove Alliance (RGA).

RGA launched in March 2022, aims to ensure that the rights of migrant workers are respected, promoted and protected through ethical recruitment and employment practices.

“Overall, the group is cautiously optimistic of the longer-term prospects of the sector, given the expected continued post-pandemic growth in demand for rubber gloves,” it said.

Shares of Hartalega closed two sen or 0.72% higher at RM2.80 today, giving it a market capitalisation of RM9.6 billion.