Hartalega reports loss, expects further pressure in 2023

Kuala Lumpur – Malaysian gloves manufacturer Hartalega Holdings Bhd has reported a loss in the third quarter of its 2023 fiscal year, as global oversupply and rising costs continue to pressure margins.

For quarter ended 31 Dec 2022, the group registered a 54% decline in revenue to RM462 million (€97 million), and a pre-tax loss of RM31 million – down from a RM331,334 million profit the year before.

Over the nine-month period, sales fell 73% to RM1.9 billion, while profits decline 97% to RM141 million, down from RM4.4 billion reported for the same period the year before.

Hartalega linked the drop in sales to the “significant moderation” of average selling price (ASP) of gloves, as well as lower volumes.

This, it said, is due to the ongoing intense global market competition due to excessive glove inventories and stock-adjustments in the supply-chain.

The earnings reversal was in tandem with the decrease in revenue, while higher costs for energy and labour partly offset by lower raw material costs.

In its short-term outlook, Hartalega said it expected the global oversupply situation to continue in 2023.

“The surplus capacity from aggressive expansions coupled with excessive buyers’ stockpiling during the pandemic have led to market supply-demand imbalances,” it stated.

At the same time, the sector also has to manage a higher operating cost environment due to rising energy and labour costs.

“As such, pressure on operating margins would continue amidst the current softened ASP for rubber gloves,” it said.

While Hartalega expects headwinds to persist for now, the group remains upbeat over the long-term prospects of the industry.

“Past experience informs that the gloves market usually undergoes an adjustment period following a pandemic-driven demand surge,” it said.

“Notwithstanding current sentiment, global glove consumption is expected to increase in the long-term in line with increased glove usage," said Hartalega.

That is especially the case in emerging markets "that have a low glove consumption base,” the group concluded.