Glove Demand Dip Sees Hartalega’s Profit Plunge 95% To RM134 Million

Hartalega reported it’s Q1FY23 results where the group registered a lower revenue of RM845.7 million which is a decrease of RM 3.06 billion or 78.3% from the corresponding quarter in the preceding year (Q1FY22).

In a Bursa filing, the group said the lower revenue was mainly due to the normalising of the average selling price (ASP) and a decrease in sales volume by 28%, as compared to Q1FY22 when both the ASP and sales demand hit a record high during the pandemic period. Q1FY23 profit before tax has decreased by RM 2.74 billion or 95.3% to RM 134.1 million, as compared to RM 2.88 billion in Q1FY22. In addition to the significant reduction in revenue, performance in Q1FY23 was also affected by higher energy and labour costs due to the increase in natural gas tariffs and minimum wage implementation

Revenue for the current quarter decreased by RM 123 million (12.7%) as compared to the preceding quarter (Q4FY22). The lower revenue was mainly due to the decline in ASP and sales volume during the quarter. Profit before tax for the quarter decreased by RM 83.9 million or 38.5% to RM134.1 million as compared to Q4FY22. Apart from the lower ASP, the increase in energy and labour costs has further weakened the profit margin for the current quarter.

As for the outlook, the glove sector is faced with a higher operating costs due to rising inflationary pressure resulting from the higher electricity and natural gas tariffs, coupled with the new minimum wage policy in Malaysia which came into effect on 1 May 2022. In addition, the sector is also experiencing escalating market competition exacerbated by the continued oversupply situation in the global glove industry.

Notwithstanding, the glove sector is expected to see a structural step-up in demand in the longer term with increased glove usage in emerging markets that have low glove consumption base. In addition, the increase in demand is also expected with higher awareness of hygiene and health consciousness among healthcare practitioners post-pandemic. Premised on this view, the Group will continue with its NGC 1.5 expansion plan. However, commissioning will depend on the prevailing market supply and demand dynamics.

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