Malaysia’s largest glove-market has reported a 10 % increase in profit up to RM 62.7 million for its first quarter which ended in June.
The increase was propelled by a weaker Ringgit and cheaper raw materials,
Sales volume jumped 15.4% despite slower demand from China, a key export market. Revenue rose 14.8% to RM320.51mil from RM279.19mil.
“The strengthening of the US dollar has mitigated the effect of lower average selling prices,” it said.
Operating profit margin slipped from 26% to 25% due to an increase in maintenance and natural gas costs.
Hartalega expects global demand for nitrile rubber gloves to continue growing at double-digit rates, driven by rising demand from the healthcare industry.
“This has spurred an increase of nitrile capacity by the industry, which we are confident will be more than matched by strong nitrile glove demand. Furthermore, we do not expect a price war as claimed by certain quarters, as global demand growth continues to be strong.
“However, average selling prices will be lower from declining raw material prices and more competitive product selling prices. The lower selling price and sustaining demand will support efforts to open new markets,” it said in a statement.
Hartalega is targeting to add 28.5 billion pieces, aggregating to total installed capacity of over 42 billion pieces per year upon completion of its new-generation glove manufacturing complex (NGC) project.
The NGC project in Sepang, which began in late-2013, would take eight years to complete at a cost of about RM2bil.
To date, Hartalega has commissioned 11 production lines, with more set to come on-stream progressively.
“We have also started construction of plants 3 and 4 of the NGC,” it said.
Glove-makers, including Hartalega and Kossan Rubber Industries Bhd, have seen their share prices surging this year, as investors bet that the companies would benefit from the favourable exchange rate and falling raw material prices.
Hartalega’s share price has risen 22% year-to-date to RM8.60 as of yesterday, valuing the company at RM7bil.
The price of rubber has dropped 18% from a recent high to 194.5 yen a kg (US$1,570 a tonne) on the Tokyo Commodity Exchange amid a worsening glut amid rising shipments from producers.
The sharp decline in the price of crude oil, where the main constituent in nitrile rubber is derived from petroleum, is also helping producers to keep costs low.
The glove export value had increased by 11% in May from a year ago, KAF-Seagroatt & Campbell Securities said in a report yesterday. Total export year-to-date has risen 18% to RM5.1bil.
This was despite a decline in export volume over the same period.
The firm noted that the US dollar has appreciated by as much as 9% to a 16-year high against the ringgit over the same period, which is helping to boost the value of exports.
“We opine that the lower export tonnage could be due to higher exports of lightweight nitrile gloves,” it added.