07/02/2024 11:35 AM

KUALA LUMPUR, Feb 7 (Bernama) -- Hartalega Holdings Bhd’s shares declined in the early session today despite posting improved earnings for the third quarter (3Q) ended Dec 31, 2023. 

As of 10.45 am, the glovemaker slid 12 sen to RM2.54, with 11.03 million units changing hands. 

Hartalega recorded a second straight quarterly profit of RM22.38 million in 3Q versus a net loss of RM31.91 million in 3Q in the previous year, following lower raw material prices, and cost savings from its operational rationalisation exercise more than offset decreased revenue.

Quarterly revenue, however, fell by 10 per cent year-on-year to RM415.64 million from RM461.84 million a year ago, dragged by lower sales volume as the industry is still facing supply chain inventory adjustment, coupled with a drop in average selling prices.

AmInvestment Bank cut Hartalega’s core net profit by 34 per cent to RM62 million from RM93 million in the financial year ending March 31, 2024 (FY2024) to reflect the Red Sea-related impact in 3Q FY2024 and longer time to scale up production in the fourth quarter of FY2024 (4Q FY2024).

“However, we maintain the financial year 2025-2026 earnings, supported by our unchanged assumption for the inventory replenishment cycle to begin in the first quarter of the calendar year 2024 and a more efficient cost structure following Bestari Jaya's complete decommissioning by the end of FY2024,” it said in a note today. 

Going into 4Q FY2024, the investment bank projects Hartalega’s quarter-on-quarter earnings to be stronger, underpinned by a roll-over of 600 million pieces of rubber gloves, commencement of the inventory replenishment cycle and lower cost structure, assuming no unforeseen disruptions from the Red Sea crisis.

“Going into 4Q FY2024, the management has guided that the group is capable of increasing the average selling price (ASP) to fully pass on higher operating costs such as raw materials and natural gas,” AmInvestment Bank said.

Hartalega’s ASP for 3Q FY2024 was US$19-US$20/per 1,000 pieces (US$1=RM4.75) versus US$21- US$22 per 1,000 pieces in 2Q FY2024, primarily due to pricing pressure from Chinese players despite rising raw material prices. 


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