As market demand for gloves remains “depressed”, the utilisation rate of its production lines currently fluctuates between 40% and 50%, revealed CEO Kuan Mun Leong during a press conference following its annual general meeting today.
“For guidance, I think the following quarters will still be challenging as we have mentioned the demand is still very depressed at the moment,” said Mun Leong.
“We expect demand to recover towards the second half of 2024,” he said.
Mun Leong believes glove demand has reached its lowest point, anticipating a rebound fuelled by the gradual depletion of stockpiles resulting from pandemic-induced panic buying. However, the reality is that it will take time.
Chief business officer Kuan Mun Keng emphasised the group’s caution regarding the recovery of glove average selling prices (ASPs), indicating it would only see improvement once glove demand starts to increase, albeit slowly.
“For the ASP to revive, the volume needs to come in first. Meaning the excess stocks have to be depleted first,” said Mun Leong.
At the end of June this year, the group’s glove ASP was US$20 (RM93) per 1,000 pieces, exceeding China’s US$14 (RM65), and higher than Malaysian glove makers’ ASP of US$16 (RM74).
Diversification opportunities
Meanwhile, Hartalega is exploring diversification opportunities due to the demanding conditions within the glove industry.
“We are in healthcare, for sure we are interested in businesses within the healthcare industry. At this point in time, we don’t have anything serious in sight yet,” said Mun Leong.
“It has to be very accretive to our core business. We have a cash pile of RM1.6 billion and we are very careful, very selective in how we use the cash,” he added.
The group recorded a net loss of RM52.47 million for the first quarter ended June 30 (Q1 FY2023) compared to a net profit of RM88.28 million in the same period a year ago. Quarterly revenue tumbled 47.97% to RM440.04 million from RM845.67 million last year on lower sales volume and ASP.
At the close of trade, Hartalega’s share price rose 1 sen or 0.51% to RM1.98, valuing the group at RM6.79 billion.