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KUALA LUMPUR (September 16): Hartalega Holdings Bhd, which expects additional demand for 120 billion pieces of disposable gloves in the next three years, does not anticipate a sharp contraction in earnings after 2021 as anticipated by some analysts.
“The analysts are right [on the earnings forecasts]. But when it comes to the third year, after 2021, they start giving us [earnings] contraction … and [it’s] a very sharp contraction.
“I mean, this is an opinion, right? They may be right at the end of the day. I don’t know. But according to my guidance, what the analysts have said cannot be correct,” Hartalega’s CEO told the media. , Kuan Kam Hon. After the group’s annual general meeting yesterday when asked to comment on analysts’ earnings forecasts.
“We are on the ground. We have been in business for the last 30 years and analysts cannot see what we can see,” he added.
Market consensus estimates that the net profit of the world’s largest nitrile glove manufacturer will increase to RM1.8 billion for the financial year ending March 31, 2021 (FY21) and grow further to RM1.918 billion. in FY22 before falling to RM1.219 billion in fiscal year 23, according to Bloomberg.
Hartalega made a net profit of RM 434.7 million in fiscal year 2020.
For its first financial quarter ending June 30, 2020 (1TFY21), Hartalega’s net profit increased 134% to a record RM 219.72 million compared to RM 94.06 million a year ago. Quarterly revenue soared 44% to RM920.09 million from RM640.1 million, as it sold more rubber gloves with higher average sales prices.
The supply of disposable gloves will not be able to meet their demand for the next three years, said Kam Hon.
“Right now, there is a huge shortage [due to the pandemic]. We don’t even know if (the industry) we have enough to meet the demand for 120 billion more pieces of gloves in the next three years, “he said.
“Immersion in gloves is a long process. The period of expansion or transition [to meet the demand] it’s at least three years, “he said, adding that the group’s annual capacity is now 38 billion pieces.
“Even in the fourth year, if you have more [rubber gloves], they would enter the inventory building. When there’s a shortage of supplies, you can’t build inventory, “he explained.
Kam Hon said that Hartalega is now expanding its capacity by about 20% per year, and that this is slightly above the organic growth rate of the industry.
According to Hartalega CEO Kuan Mun Leong, the demand for gloves for developed countries has increased 30% since the outbreak, while for developing countries, where per capita consumption of gloves used to be very low, glove use it has more than doubled.
Mun Leong said the group is accelerating its capacity expansion.
“To date, we have commissioned 10 of the 12 production lines for Plant 6, while for Plant 7, the first production line is on track for completion in October 2020.
“In addition to this, Hartalega is further expanding our expansion plans with the acquisition of land adjacent to Plant 7 of the NGC (Next Generation Integrated Glove Manufacturing Complex).
“This will see the construction of four additional plants, namely Plants 8 to 11, which will progress rapidly, adding an installed capacity of another 19 billion pieces per year once they are completed,” added Mun Leong.
Beyond this, Mun Leong said that Hartalega’s long-term capacity growth will be driven by the upcoming expansion of NGC, or NGC 2.0. The group aims to launch its first production line under NGC 2.0 by the first half of 2022.
“Once fully completed by 2027, these expansion plans will see the group’s total annual installed capacity increase to 95 billion pieces per year,” Mun Leong said.
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