The demand for nitrile gloves is expected to remain robust and can offset any possible margin compressions in the industry, according to Hartalega Holdings Bhd executive chairman Kuan Kam Hon.
“The industry as a whole is poised for growth, with tremendous potential in emerging markets due to rising global healthcare awareness and healthcare reforms.
“The rubber glove market in Brazil is expanding due to easing regulations for rubber gloves imports, while China’s healthcare reform is set to catalyse its healthcare industry,” Kuan said in the company’s latest annual report.
He said the outlook was bullish for the sustainable long-term growth of the group.
“We see great potential for us to capitalise on the opportunities inherent in the market,” he added. He also noted that for the first time, the nitrile gloves segment had taken the lead and surpassed natural rubber with a demand ratio of 51% to 49%.
“Although European importers must now pay 2% to 2.7% for glove imports from Malaysia, the fact that nitrile glove exports from Malaysia to the European Union increased by 30.3% in 2013 clearly indicates the robust demand for nitrile,” Kuan said.
Hartalega’s margins of around 21% for the financial year ended March 31, 2014 (FY14) remained above the industry average, despite the downward pressure on average selling prices with increased electricity and maintenance costs.
“This was also despite a higher tax rate of 24.4% for the year under review from 23.1% in the previous year as we have fully utilised our reinvestment allowance tax incentives,” he said.
Despite some of these cost increases and contraction in margins on strong competition, the company, which presently supplies 14% of the global demand of nitrile gloves, is still able to hold on to a price premium in the nitrile glove segment.
Moving forward, Kuan noted that the resilient demand for nitrile gloves will certainly augur well for it on the back of increasing industry utilisation rates.
The industry outlook has also been bolstered, as glove manufacturers across the board are building up their nitrile production capacity, he added.
Healso noted that its next-generation integrated glove manufacturing complex (NGC) will increase capacity byabout 15% year-on-year to more than 42 billion pieces per year.
“The NGC will establish a total of six manufacturing plants and 72 technologically advanced production lines.
“We expect the NGC’s productivity to be 70% higher than our current set-up,” Kuan said. He said that it was on track to commission the first production line for the NGC by the end of this year, and was now constructing plants 1 and 2 with supporting facilities on the piece of land that it had acquired last year.
Hartalega’s shares climbed six sen to close at RM6.71 yesterday. (Source: Hartalega Holdings Bhd Annual Report 2014)