Hartalega: Little impact from US protectionism expected

KUALA LUMPUR: Hartalega Holdings Bhd, which plans to submit its US Food and Drug Administration (FDA) application for anti-microbial gloves in April, does not see any pressing concerns impacting its business in the advent of a trade war sparked by US President Donald Trump.
Hartalega is currently the largest producer of nitrile gloves in the world and exports to over 60 countries across five continents namely Americas, Asia, Europe, Australia and Africa. Its export to the US stood at over 50%.
“For glove makers, we don’t think they will levy a tax on glove that much, not like 25%. We’re currently paying a small amount of tax or marginal tax for the industrial sector,” chairman Kuan Kam Hon told a press conference after its EGM yesterday. Gloves for medical use is tax-free worldwide.
Managing director Kam Mun Leong said it needs to study the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that was signed by Malaysia and 10 other countries last Friday to comment on the implications of it to the industry.
Speaking on its export markets, he said China is a difficult market for Hartalega, because there is no central purchasing system there, but maintained that operations there are not loss-making.
In May, the group will be launching its anti-microbial gloves in Europe. The approval process for its US FDA application is expected to take six to nine months.
“The FDA submission is a milestone because it gives credibility to the product. Once we get FDA certification, it’s a good testimony for the product,” said Mun Leong.
Meanwhile, he said the group’s Next Generation Integrated Glove Manufacturing Complex (NGC) will now have seven plants instead of six planned initially, requiring an additional RM250 million capital expenditure, on top of the RM2.2 billion for the construction of the six NGC plants.
Mun Leong explained that four plants are already operational while the construction of Plant 5 and 6 is underway, whereas plant 7 is expected to start construction in June/July 2018.
Upon completion, the NGC will boost Hartalega’s production capacity to 44.6 billion pieces per year from the current 29 billion pieces.
The group is focusing on organic growth and growing its distribution, and not on merger and acquisition.
“There’s plenty of opportunity in glove manufacturing and glove distribution. We just want to capitalise on the opportunity that is available to us at this moment,” said Kam Hon.
Earlier at the EGM, Hartalega obtained approval from shareholders for its bonus issue of up to 1.71 billion new shares, which is on the basis of one bonus share for every one existing share held by shareholders. The bonus issue will enable the company to enhance liquidity and provide shareholders with the opportunity to participate in Hartalega’s ongoing success.