KUALA LUMPUR, Nov 8 — Rubber glove maker, Hartalega Holdings Bhd's net profit shrank 97 per cent to RM28.34 million in the second quarter of its financial year ending March 31, 2023 (Q2 FY2023) from RM914 million in Q2 FY2022 due to the sharp drop in revenue and increase in energy costs.

Revenue slumped 71 per cent to RM584.56 million in the quarter ended Sept 30, 2022 from RM2.01 billion previously.

The significantly lower revenue was mainly due to the lower average selling price (ASP) caused by oversupply situation given the intense market competition, coupled with the decrease in sales volume by 27 per cent compared to Q2 FY2022, Hartalega said in a filing to Bursa Malaysia today.

For the first six-month period, net profit eased to RM116.62 million from RM3.17 billion on the back of a revenue of RM1.43 billion versus RM5.91 billion. This was also affected by higher operating costs due to the increase in natural gas tariffs amid rising inflation and new minimum wage implementation.

Hartalega said the sector was also beset with a continuous global oversupply situation, which had resulted in the industry operating at sub-optimal utilisation levels.

"The overcapacity from aggressive expansion as well as buyers’ excessive stockpiling during the pandemic had led to market supply-demand imbalances and the ongoing intensified market competition.

"Despite seeing a certain degree of capacity rationalisation during the year, the conundrum facing the sector is likely to continue for the time being before the market can revert towards an equilibrium level," it said.

As such, the group has taken a strategic approach to align its Next Generation Integrated Glove Manufacturing Complex (NGC) 1.5 pipeline expansion project with the prevailing market supply and demand dynamics while monitoring the market development closely.

Overall, Hartalega believed the global glove consumption is expected to increase in the long term in line with increased glove usage, especially from emerging markets that have a low glove consumption base.

The increase in demand could also be driven by the higher awareness of hygiene and health consciousness among healthcare practitioners post-pandemic.

It said, historically, while the glove market typically undergoes an adjustment period following a pandemic-driven demand surge, the consumption of gloves recorded an average annual growth of 8.0 per cent to 10 per cent prior to the Covid-19 pandemic.

"The group is cautiously optimistic about the prospects for the sector given the expected continued post-pandemic growth in rubber gloves demand over the longer-term period," it noted. — Bernama