KUALA LUMPUR (Sept 6): Hartalega Holdings Bhd (KL:HARTA) said it is seeing demand recovery amid restocking activities while full capacity at Chinese factories have pushed some of the orders to Malaysia.

Demand for gloves at times is strong, but it may slow down occasionally, Hartalega chief executive officer Kuan Mun Leong told reporters following the annual general meeting of Malaysia's largest nitrile glovemaker. However, demand would likely normalise by 2026 after the “bumpy” years, he said.

“I think it will take another one to two years before things are really normalised,” Kuan said. “In other words, by 2026.”

Hartalega produces up to 2.2 billion pieces of gloves currently and the company is progressively ramping up capacity to 2.7 billion pieces by the end of the financial year ending March 31, 2025 (FY2025) to meet demand.

For this year, Hartalega has earmarked RM300 million for capital expenditures, of which RM170 million are for investments in new capacity, while the remaining are for upgrading automation systems.

Currently, Hartalega has already automated up to 85% of the production processes, though the company said changes in the competitive landscape necessitate full automation for higher yield and output. The automation upgrades are expected to take two years to complete.

On the recent sharp rise in ringgit, Kuan said prices quoted to their customers would be reflected on a monthly basis while average selling prices of gloves are likely to increase on rising costs such as natural gas.

Tariffs imposed by the US on China-based glove makers have forced some of the Chinese glove manufacturers to open factories in Southeast Asia, particularly Indonesia which have lower energy cost than in Malaysia, executive chairman Kuan Kam Hon said while commenting on the industry.

Hartalega remains unperturbed given its leading technology know-how and familiarity with the workforce culture in the region, he said, noting that Chinese glovemakers deal with a “very different set of workforce” and primarily use coal as energy source in China.  

“If they come out to this part of the world, the playing field is level [in terms of energy costs and workforce productivity],” Kuan said. “We can take them on, we have full capability and full confidence in taking them on.”

Shares of Hartalega paused for midday trading break six sen or 2.3% down at RM2.51, giving the company a market capitalisation of RM8.6 billion.