Update 8/25/2016: A statement from Hartalega Holdings Bhd Managing Director KuanMun Leong clarifies that the 600 workers were not laid off or fired, as previously reported, and that the reduction of the headcount was not due to increasing costs or the minimum wage hike.
The workers were previously contract workers who were recruited when there was a shortage in supply of foreign workers. The headcount reduction exercise was part of Hartalega’s continuous efforts in re-engineering their production processes to improve efficiency and ensure optimum use of labour. The move has resulted in a productivity improvement from 3.9 to 3.6 workers per million pieces of gloves.
The company assures the public that they will continue to grow and recruit more workers in line with their established expansion plans.
This was also highlighted during the press conference following the Group’s Annual General Meeting on August 23, 2016.
Original article below:
Hartalega Holdings, a synthetic rubber glove manufacturer and supplier from Malaysia, recently announced that it has fired almost 600 people in a “cost management exercise”.
This is according to a Nikkei Asian Review (NAR) report which also says this figure is close to 10% of the company’s headcount.
During the company’s annual general meeting, Hartalega Managing Director KuanMun Leong said that the move helped the company mitigate rising costs due to the minimum wage hike.
The company has also reduced costs by optimising energy consumption and redesigning its production line, but did not reveal savings. Earlier this month, the company announced a 10.4% year-on-year decline in net profit in the second quarter due to stiffer competition and higher costs.
NAR also said that rival company Top Glove announced earlier this year that it was pruning 5% of its 7,000 foreign workers after the government raised the levy on foreign workers to RM2,500.
The government set the new minimum wage at RM1,000 for Peninsular Malaysia and RM920 for Sabah and Sarawak from July 1. The natural gas tariff also rose by 5.95% from July 15, following a 17.1% increase in gas prices on January 1.
According to Hartalega, talk of oversupply in the market was unfounded and it is “perceived intensified competition” that has driven glove prices down.
The Malaysian Rubber Glove Manufacturers Association said that global demand for rubber gloves is growing at 8% annually.
Hartalega’s largest markets are North America (56%), Europe (28%), and Asia Pacific (15%), according to NAR.
Hartalega’s main products are nitrile gloves, which are synthetic and more resilient, for the healthcare and industrial sectors. The company expects stronger demand in healthcare as nitrile gloves replace natural latex ones.
Hartalega has invested RM2.2 billion in its Next Generation Integrated Glove Manufacturing Complex in Sepang, which has more automated manufacturing. It has already completed two plants but delayed commissioning two other plants that should now open by October. The new plants can each produce some 3.8 billion pieces annually.
“We delayed plant three and four to better regulate the expansion to the market,” NAR quoted Kuan as saying. “We do not want to put out a huge capacity and have it turn against us by driving glove prices down.”