With the rubber gloves industry seeing competition and drop in demand, Hartalega Holdings Berhad said it was looking to mergers and acquisitions (M&A).
It said the diversification would reduce concentration risks, maintain a healthy cash cow, and invest in the company’s future growth. Hartelega manufactures gloves at its factories in Selangor.
The company has a healthy balance sheet and strong war chest to support key long-term business objectives moving forward,” it said recently in a corporate presentation.
Its strategic initiatives include being an original brand manufacturer (OBM) focusing on the Asia Pacific market. Hartalega has a current annual glove production capacity of 44 billion pieces and that its targeted production capacity is 95 billion pieces of gloves annually.
The company also announced that it has slowed down its Next Generation Integrated Glove Manufacturing Complex (NGC) 1.5 plant expansion due to the oversupply of gloves in the market.
Hartalega CEO Kuan Mun Leong said the company was phasing down its plant expansion plan in view of demand-supply imbalances as buyers are still adjusting their inventory levels.
“We do not want to commission and push up the lines because of oversupply. The expansion started last year and we have deferred it a couple of times.
During the pandemic’s peak, there were a lot of panic buying and over purchases. I think the market needs time to digest all these over purchases, and we are looking at the end of the year, maybe even the first quarter next year,” he had said at Hartalega’s annual general meeting on Sept 1.
NGC 1.5 comprises four plants with 48 lines in total that will produce approximately 396,000 pieces of gloves per annum per line. Kuan said the average selling price (ASP) has bottomed out.
On competition from China, Kuan said: “We look upon the Malaysian government to provide a conducive business environment for the glove sector to compete with other countries, as well as business-friendly policies. For example, for gloves, it’s energy cost and wages.”
Although Malaysian glove products still dominate 51 per cent of the world market, the rapid expansion by Chinese manufacturers could threaten Malaysian glove manufacturers.
China accounts for about 20 per cent of global capacity but has an advantage in terms of energy cost over Malaysia because they use coal to generate electricity,” he said, adding that Hartalega will remain focused on cost optimisation and automation in the face of stiff competition in the market. – The Health