KUALA LUMPUR (Aug 23): Having recently undertaken cost management exercises, Hartalega Holdings Bhd expects its profitability to improve going forward. In addition, the company believes the industry conditions have bottomed out with lesser competitive pricing pressures, as glove makers slow down their pace of expansion in accordance to market demand.

"In the past four months, we have looked into our cost structure and trimmed down costs in four key areas, namely raw materials, labour, energy and chemicals. For instance, we have cut our workforce by 600 and reviewed our production line design to reduce wastage and improve energy efficiency," said Hartalega managing director Kuan Mun Leong at the company's annual general meeting (AGM) today.

"Although we cannot quantify the impact to our bottom line, we believe the cost savings will be substantial and expect our financials to improve in the coming quarters. Further, the market perception that there is excessive oversupply in the sector is unfounded — our orders for the coming months are full and we are in fact working very hard to deliver our orders," he added.

"Going forward, our RM2.2 billion Next Generation Integrated Glove Manufacturing Complex (NGC) will continue to be the key driver to reinforce our pole position in the nitrile gloves segment. As of today, we have spent RM1.3 billion on NGC and will spend the RM900 million in the coming years.

"For FY17 ending March 31, we are allocating RM400 million in capital expenditures on NGC. In addition, we have rescheduled our Phase 2 expansion plan in accordance to the market condition with our plants 3 and 4 starting operations in only October this year. In our earlier plan, these two plants were scheduled to commence production at the beginning of FY17," he said.

"Nonetheless, the demand for examination gloves has been growing at 8–8.5% per annum in the past 15 years. Notably, nitrile glove segment is growing the expense of the natural rubber glove segment. With the growing demand for nitrile gloves in the long term and the ongoing capacity expansion at NGC, we are confident that Hartalega will continue to deliver growth in the years ahead," he concluded.

At the AGM, the company's proposed final dividend of 2 sen per share was approved by shareholders, bringing the total dividends for FY16 to 8 sen per share. The final dividend will go "ex" on Sept 15 and will be paid on Sept 28.

With an annual capacity of 19 billion gloves, Hartalega is the world's largest synthetic glove maker with state-of-the-art manufacturing plants in Bestari Jaya and Sepang, Selangor. The company has a dividend policy of distributing a minimum of 45% of its annual net profit to its shareholders since FY12.

At 2.09pm, Hartalega traded unchanged at RM4.30, for a market capitalisation of RM7.06 billion.