This article first appeared in The Edge Malaysia Weekly on November 20, 2023 - November 26, 2023
Things may be starting to look up for the glove sector, with Hartalega Holdings Bhd and Kossan Rubber Industries Bhd reporting profits after three consecutive quarters of losses.
Kossan, which reported a net profit of RM40.97 million for the July-to-September quarter, attributed the improved performance to better cost controls and lower raw material costs, as well as the sale of higher-margin infrastructure products at its technical rubber products division.
Meanwhile, Hartalega said its net earnings of RM27.7 million in the same quarter were underpinned by lower raw material and operating costs, as well as cost savings from its operational rationalisation exercise.
Hartalega’s rationalisation efforts include the decommissioning of its Bestari Jaya facility to consolidate operations at the Next Generation Integrated Glove Manufacturing Complex in Sepang, Selangor.
Supermax Corp Bhd has not announced its financial results for the July-to-September quarter; and Top Glove Corp Bhd suffered a higher net loss of RM463.15 million for the June-to-August quarter, owing to an impairment of RM389 million comprising a goodwill impairment and write-off of property, plant and equipment. This put the spotlight on its aggressive share buybacks over the past three years.
While glove makers are expected to see gradual improvement, it is uncertain whether the industry is already out of the woods, given the pricing competition and oversupply. These factors will continue to weigh on average selling prices (ASPs) and analysts have cautioned that it may take another year before the industry reaches its supply-demand equilibrium.
As the saying goes, one swallow does not make a summer.
Both Hartalega and Kossan have adopted a more conservative approach to their expansion plans, even during the height of the Covid-19 pandemic. This gave them some respite when demand normalised post-pandemic, resulting in a sharp fall in ASPs.
Those with much more excess capacity may have to continue to deal with the strong headwinds.
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