KUALA LUMPUR (Sept 7): Hartalega Holdings Bhd said its rubber glove factories are not running at full capacity but at about 70% currently as the company abides by the Malaysian government’s Covid-19-driven 60% workforce requirement for manufacturers which are also required to commit themselves to a fortnightly health screening for their entire factory workforce to curb the spread of the pandemic.
Hartalega chief executive officer (CEO) Kuan Mun Leong said the Covid-19 screening for all its factory workers every two weeks "is something that is disruptive and difficult to execute”.
“We should be able to operate at 100% [capacity] as 90% of the workforce is vaccinated but the fortnightly screening [for Covid-19 among workers] is something that is disruptive and difficult to execute.
"So, we are still talking to the government if there is a better way to do this, especially taking note of the government's preparation for Covid-19 to go into the endemic phase,” Kuan said today at a virtual media briefing after Hartalega’s annual general meeting (AGM).
According to him, Hartalega can currently produce up to 44 billion pieces of gloves a year.
He lamented that for the first time ever in Malaysia, glove factories within areas placed under the enhanced movement control order (EMCO) are not allowed to operate as gloves are not recognised as an essential item during the pandemic.
"There was some impact on the business — in terms of capacity losses — about 5% of [Hartalega’s] total annual capacity,” he said without elaborating on how much sales Hartalega has lost due to its factories' inability to operate under full capacity. In response to queries by theedgemarkets.com, Hartalega said it was not able to quantify the loss in sales at this juncture.
Kuan said the disruption caused by the temporary stoppage of its plants’ operations had caused buyers to move their purchases to other glove-producing countries like Thailand and China.
As such, he said it is important for Malaysia to continue providing a conducive operating environment for the rubber glove sector as glove manufacturers in China aggressively expand their production capacity.
According to him, China’s global market share in terms of glove supply is estimated to increase to 23% by 2022 from 16% currently, while Malaysia’s global market share is expected to shrink to around 60% from 67%.
“The future of the glove sector is important for Malaysia as we are the global leader. But now, we face competition from China, so we hope the [Malaysian] government can provide us with the right support, so that the country can continue to take the lead,” he said.
According to Hartalega’s website and Bursa Malaysia filing, Hartalega’s existing glove factories are located in Selangor within Sepang district and Bestari Jaya town. The facility in Sepang is known as the Next Generation Integrated Glove Manufacturing Complex (NGC), according to the website.
Hartalega is also building new manufacturing facilities in Kedah. In a March 10, 2021 Bursa filing, Hartalega said the company through its wholly-owned subsidiary Hartalega NSM Sdn Bhd had on that day inked a sales and purchase agreement with Northern Gateway Free Zone Sdn Bhd, a wholly-owned subsidiary of Northern Gateway Sdn Bhd (NGSB), for the acquisition of approximately 250 acres (100ha) of land within the Kota Perdana Special Border Economic Zone in Bukit Kayu Hitam.
NGSB is a wholly-owned entity of the Minister of Finance Inc, according to Hartalega.
In Hartalega’s latest annual report, the company indicated that the remaining four lines of Plant 7 of the NGC are set to be completed by 2021 to increase Hartalega's annual installed glove production capacity by 2.7 billion pieces a year.
According to Hartalega, the completion of Hartalega’s NGC 1.5 facility will increase the group's capacity to 63 billion pieces of gloves a year.
At the press conference today, Kuan said Hartalega has set aside about RM1.3 billion for capital expenditure (capex) over the next three financial years mainly to finance the group's production capacity expansion, automation besides research and development.
For current financial year ending March 31, 2022 (FY22), Kuan said Hartalega has set aside around RM660 million for capex from the RM1.3 billion allocation.
On Bursa today, Hartalega’s share price closed unchanged at RM6.91 for a market value of about RM23.63 billion.
Hartalega has 3.42 billion issued shares.