KUALA LUMPUR (Nov 2): Hartalega Holdings Bhd's net profit contracted 59.55% quarter-on-quarter (q-o-q) to RM914 million in the second quarter ended Sept 30, 2021 (2QFY22) from RM2.26 billion.

Notably, Hartalega’s latest quarterly profit dropped below RM1 billion for the first time after surpassing the mark for three straight quarters, joining the downtrend in earnings witnessed by the other big four glove companies.

As a result, its earnings per share fell to 26.74 sen in 2QFY22 from 66.08 sen in 1QFY22. Revenue almost halved to RM2.01 billion in 2QFY22 from RM3.9 billion in 1QFY22.

Hartalega blamed the drop in earnings on decreased sales revenue, coupled with higher operating costs from lower plant utilisation rate and lower profit margin as the drop in raw material prices was not in tandem with the drop in the average selling prices (ASPs) of gloves.

Its sales volume has also dropped 31% q-o-q as its plants were shut down due to the enhanced movement control order (EMCO) in July 2021 and subsequently were operating at only 60% workforce restriction to comply with the National Recovery Plan, the group's filing with Bursa showed. 

On a year-on-year (y-o-y) basis, however, Hartalega’s net profit jumped 67.72% from RM544.96 million in 2QFY21. This resulted in higher earnings per share compared with 3.85 sen in 2QFY21. Quarterly revenue rose 49.43% from RM1.35 billion a year ago.

Hartalega said the increase in profitability was due to higher sales revenue and ASPs compared to the same period a year ago.

Meanwhile, the board has declared a single-tier first interim dividend of 35.2 sen per share in respect of the financial year ending March 31, 2022 (FY22). The payment date falls on Dec 2, 2021, while the entitlement date has been fixed for Nov 18, 2021.

This brings the total dividend for the cumulative six months ended Sept 30, 2021 (6MFY22) to 54.95 sen per share, which is 49 sen or 824% higher than the 5.95 sen dividend paid in 6MFY21.

Hartalega's net profit for 6MFY22 expanded four-fold to RM3.17 billion from RM764.68 million in 6MFY21, while revenue also rose 169.98% y-o-y to RM5.91 billion from RM2.27 billion previously.

On prospects, the group anticipated that the one-off special tax or prosperity tax announced in Budget 2022 could have a material impact on the group’s earnings in the second half of the current financial year (2HFY22) when the prosperity tax is gazetted.

Meanwhile, the group said the ASP for gloves has been declining from its peak in the first half of the financial year moving into the second half of the financial year.

Hartalega attributed the tapering of ASPs in recent months to increasing supply from major glovemakers as well as moderating demand because of customers adjusting inventories in view of declining selling prices.

Notwithstanding that, it said post-pandemic, the sector is expected to undergo a structural step-up in demand on the back of increased glove usage from emerging markets with low gloves consumption per capita and heightened hygiene awareness.

To support the government’s initiative to increase the vaccination rate among the Malaysian workforce, Hartalega said over 90% of its workforce have been fully vaccinated.

“Moving forward, the group will continue to focus on improving efficiency and automation level across our operations. We remain optimistic of the longer-term prospects underpinned by growing demand for rubber gloves and ongoing expansion plans,” it added.

Hartalega shares fell four sen or 0.71% to RM5.63 at noon break on Tuesday, valuing the group at RM19.3 billion.