Hartalega : MSWG Q&A 17th AGM

Hartalega Holdings Berhad

MSWG Q&A

2023

MSWG Q&A - Operational & Financial Matters

Question:

Global oversupply and excess inventory levels resulted in slower purchase demand that impacted average selling prices (ASPs) for rubber gloves. Having spiked at the onset of the pandemic and then rapidly declining in 2021, ASPs continued to moderate in 2022 to subsequently reach below pre-pandemic levels towards the second half of the year (page 15 of IAR 2023).

What are your current ASPs and how do they compare with Chinese manufacturers? What differentiates Hartalega's pricing strategy from competitors, particularly those offering lower prices?

Response:

In the most recent quarter, our ASPs ranged around USD 20 per thousand pieces. The Chinese players are pricing their products relatively lower to maintain ASP gap with Malaysian players.

Being one of the forefront glove manufacturers in the industry for over 35 years, Hartalega is well-positioned and differentiated via our reliability and consistency in product quality and delivery.

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MSWG Q&A - Operational & Financial Matters

Question:

ASPs are expected to be lower in the next few quarters, as some key input costs such as natural gas have declined and glove players typically pass on cost savings to customers. Considering the existing market dynamics, what is Hartalega's outlook for ASPs over the next few quarters? Are there any anticipated changes in market conditions or internal strategies that might influence these projections?

Response:

Given the persisting headwinds facing the sector, we do not expect any positive impetus for the ASP outlook and it would likely to remain soft within the short to medium term period, or at least for the remaining of FY 2024.

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MSWG Q&A - Operational & Financial Matters

Question:

Please outline the distinct advantages that Malaysian glove manufacturers hold in comparison to their Chinese counterparts.

Response:

The Malaysian manufacturers have been operating in the glove market for over 30 years and remained as key global players today. Hence, being more well-established and matured with the glove manufacturing know-how, our key advantage would be in terms of higher level of production consistency, reliability and quality relative to the Chinese players.

Having said that, our Chinese peers currently have key advantage in the form of lower energy cost due to the cheaper cost of coal as compared to domestic players who are using the more expensive but cleaner natural gas.

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MSWG Q&A - Operational & Financial Matters

Question:

Once market demand and supply reach an equilibrium, post-pandemic growth in global demand is expected. By taking proactive measures today, Hartalega will remain at the forefront of the industry as a trusted global healthcare products provider (page 19 of IAR 2023).

Considering the present market dynamics and excluding any exceptional events like a pandemic, when does

Hartalega anticipate the glove market to achieve a state of equilibrium? What growth rate does Hartalega expect for the post-pandemic global demand for gloves?

Response:

The post-pandemic market outlook remains volatile amidst the ongoing market adjustment today. We would expect the market to reach new equilibrium in terms of supply-demand dynamics by year 2024/25. This is premised upon rational capacity expansion by key global players.

Thereafter, we believe the long-term global demand would continue to grow at an average rate of 6%-8% per annum basing on the pre-pandemic average growth in consumption over the past 20 years.

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