Hartalega Holdings Bhd posted a stronger-than-expected set of first-quarter results for FY2027, with net profit more than doubling on the back of higher average selling prices (ASPs), although the glove maker expects earnings to moderate in the coming quarters as raw material costs and selling prices normalise.
According to Kenanga Research, Hartalega recorded a net profit of RM70 million for the first quarter ended June 30, 2026, representing an increase of more than 100% year-on-year and 109% quarter-on-quarter.
The earnings exceeded expectations, accounting for 43% of Kenanga Research’s full-year forecast and 44% of consensus estimates, largely due to stronger-than-expected profit margins.
The research house attributed the earnings beat to a sharp increase in glove ASPs, which rose suddenly as manufacturers passed on higher nitrile raw material costs stemming from geopolitical tensions in the Middle East.
However, Kenanga cautioned that the elevated margins are unlikely to be sustained, noting that glove prices have already begun retreating as nitrile costs ease.
Quarterly revenue increased 18% from the preceding quarter, driven primarily by a 27% rise in ASPs, which more than compensated for a 7% decline in sales volume.
The stronger pricing also lifted earnings before interest, tax, depreciation and amortisation (EBITDA) by more than 50%, while the EBITDA margin improved to 22% from 16% in the previous quarter.
On a year-on-year basis, revenue rose 9%, supported by higher selling prices despite a slight 1% decline in sales volume.
Hartalega’s plant utilisation eased to 65% during the quarter from 70% in the previous quarter as some customers deferred purchases amid the spike in glove prices.
Management indicated that ASPs have already peaked and are expected to continue moderating over the coming months.
For the second quarter of FY2027, the group guided that nitrile glove ASPs would decline from US$26-US$28 per 1,000 pieces to around US$19-US$20 per 1,000 pieces.
Kenanga’s channel checks suggest prices have already fallen from around US$28 in May to US$21-US$22 in July and could ease further to US$18-US$19 in August.
The research house said the decline in selling prices, coupled with the consumption of previously purchased high-cost nitrile inventories, is expected to compress margins and earnings in the current quarter.
Hartalega also expects second-quarter earnings to come in below those recorded in the fourth quarter of FY2026.
Management said customer demand remains mixed, with some buyers continuing to delay orders in anticipation of lower prices, while others who had postponed purchases during the ASP spike have begun returning to the market.
Kenanga expects glove prices to stabilise later in the financial year as manufacturers adjust ASPs to offset higher energy costs.
The research house projects ASPs could rise by around US$1.50 to US$2.00 to approximately US$20.50-US$21.00 per 1,000 pieces in the fourth quarter of FY2027.
Hartalega said ongoing operational improvements continue to enhance production efficiency.
The group has reduced energy costs by approximately 40%, while workforce optimisation at Plant 9 has cut staffing levels by half to about 200 employees.
To meet improving medium-term demand, Hartalega has also begun preparations to restart Plant 3, with production expected to resume gradually from December 2026.
The company plans to redeploy idle workers and redesign production workflows to improve productivity.
Upon completion of the restart, Hartalega’s annual production capacity is expected to increase from 27 billion gloves to 30 billion pieces by the end of FY2027.
Despite near-term margin pressure from softer glove prices, Kenanga said Hartalega’s ongoing cost optimisation initiatives and capacity expansion should position the company to benefit from improving demand and higher plant utilisation over the longer term.
