Hartalega to shut gloves plant under rationalisation plan

Kuala Lumpur – Malaysian gloves maker Hartalega Holding Berhad has launched a five-year rationalisation plan to improve its competitiveness amid ongoing market challenges.

Under the programme, the company will decommission its Bestari Jaya facility in Selangor, western Malaysia, said an 8 May announcement from Hartalega.

Furthermore, the gloves manufacturer will consolidate operations at its flagship ‘next generation’ integrated glove manufacturing complex (NGC) in Sepang.

The Bestari Jaya facility currently consists of four production plants with 40 production lines, some of which have been operational since 2004.

The decommissioning exercise is expected to be completed by the end of 2023.

“This is a difficult yet necessary decision to ensure that Hartalega will be able to weather the tough market landscape,” said the company announcement.

Hartalega, it continued, will support affected employees over the next six months, with the potential option of redeployment to the NGC facility.

According to Hartalega, the consolidation of operations at NGC will provide a more “viable” long-term competitiveness.

Compared with the “state-of-the-art” production lines at the NGC, the Bestari Jaya facility is “less efficient and restricted by older technology”, it added.

The plant also generates higher energy and labour cost compared to NGC, and incurs higher maintenance costs due to its age.

Once completed, the decommissioning is expected to reduce operating cost and depreciation, with “a direct benefit” on the bottom line.

Over the long-term, the NGC facility has the capacity for future expansion in line with the prevailing market supply and demand dynamics.

As a result of the decommissioning, Hartalega has recognised an impairment loss of RM347 million (€71 million) for the financial year 2023, ended 31 March.

The company has earmarked RM70 million for retrenchment costs and contract obligation expenses for the next fiscal year.

During the 2023 fiscal year, Hartalega recorded a loss of RM191 million, down from a profit of RM4.6 billion reported the year before.

Hartalega linked the decline to a 70% decline in annual revenue to RM2.4 billion as well as the RM347 million impairment loss for the Bestari Jaya plant closure.

Other contributing factors includes lower production utilisation as well as higher operating costs such as energy and labour costs.