KUALA LUMPUR (May 10): Hartalega Holdings Bhd posted a net loss for the fourth quarter ended March 31, 2022 — its first-ever quarterly loss — largely because of a provision for the Prosperity Tax (Cukai Makmur).
The rubber glove maker reported a loss of RM189.7 million for the quarter, versus a net profit of RM1.12 billion in the previous year's corresponding quarter. In the preceding quarter (3QFY22), the group had made a net profit of RM259.06 million. Despite the loss, the group declared a third interim dividend of 3.5 sen per share to be paid on June 9.
Revenue for the quarter dropped 58% year-on-year and 3.7% quarter-on-quarter to RM968.69 million.
For the full-year period, Hartalega still posted positive earnings growth of 12% to RM3.23 billion from RM2.8 billion a year earlier, while revenue increased 18% to RM7.89 billion from RM6.7 billion.
Analysts said Hartalega’s dip into the red was expected.
Malacca Securities Sdn Bhd senior analyst Kenneth Leong said Hartalega’s performance for the quarter was within expectations, as the management had previously provided guidance on the potential impact from Cukai Makmur.
“The loss would be a one-off event due to the financial year ending in March. Hence, the impact of Cukai Makmur attributed from the previous quarters snowballed into 4QFY22,” he told theedgemarkets.com.
"With demand remaining solid, ASPs normalising and plant utilisation rate improving, Leong said Hartalega’s upcoming earnings will begin to normalise in the coming quarters.
“The numbers would not match FY22, but we expect them to be much better than pre-Covid levels,” he added.
Bloomberg data showed that the results were largely in line with consensus expectations, which averaged at RM3.32 billion.
Full-year forecasts by research houses ranged between RM3.02 billion by Maybank Investment Bank, and RM3.71 billion by JF Apex Securities, the data showed.
Another analyst concurred, pointing out that the full impact of the Cukai Makmur had already been factored into the group’s 4QFY22 financials.
“It was expected. Hartalega gave their guidance in the previous quarter on the one-off tax effect, which would likely push them into the red,” the analyst said.
The market did not seem surprised by the net loss for the quarter either, as Hartalega closed up six sen or 1.4% higher at RM4.34 on Tuesday (May 10). Its market capitalisation stood at RM14.88 billion.
Tax provisions aside, Hartalega chief executive officer Kuan Mun Leong pointed to the normalisation of average selling prices (ASPs) and demand as factors behind the decline in performance for the fourth quarter.
"Nevertheless, as we look towards FY23, we expect prospects to remain, even as we enter into the endemic phase.
"For the glove sector, current ASPs seem to have bottomed out and the opening of international borders and easing of travel restrictions is expected to relieve the current shortage of workers, which will be of benefit to Hartalega,” he said in a statement.
Kuan added that there will be a step-up in global demand for gloves over the longer term, in view of the increased glove usage from emerging markets with low glove consumption base, complemented by increased awareness of hygiene among healthcare practitioners post-pandemic.
Hartalega is poised to meet the demand growth, he said, as the group’s Next Generation Integrated Glove Manufacturing Complex (NGC) expansion is on track, with the first production line to be commissioned by the fourth quarter of the calendar year.
However, the group continues to face external pressures such as the ongoing Russia-Ukraine conflict and the lockdown in major cities in China due to the wave in Covid-19 cases.
“Additionally, the recent implementation of the new minimum wage policy in Malaysia is likely to result in higher operating costs for the manufacturing sector.
“Amidst this challenging backdrop, we are focused on cost optimisation, continuous efficiency improvement and automation initiatives across our operations to ensure the sustainability and resilience of the Group,” Kuan said.