Hartalega's Q2 net profits jump 79pct on higher average selling prices

KUALA LUMPUR - Hartalega Holdings Bhd saw a remarkable surge in its net profits by 79.3 per cent to RM32.8 million in the second quarter of FY27, up from RM18.3 million the previous year. This growth was primarily driven by a rise in average selling prices (ASPs) and cost optimisation measures. Meanwhile, revenue climbed 19.5 per cent to RM644.7 million, against RM539.7 million the same period last year, also due to higher ASPs while sales volume stayed relatively unchanged.

The price boost was instrumental in offsetting the surge in raw material costs, exacerbated by geopolitical tensions in the Middle East. Despite this, the operating profit more than tripled to RM40.4 million from RM13.7 million. However, a notable decline in operating profit from RM80 million to RM40.4 million was observed, in contrast with the previous quarter's performance, mainly because of a sharp drop in ASPs that couldn't counterbalance the high raw material prices.

Additionally, increased net foreign exchange losses also impacted the profit. For the six months leading up to Q2 FY27, the company reported a 14.4 per cent rise in revenue to RM1.25 billion, coupled with a substantial increase in after-tax profit to RM102.9 million, from a mere RM30.2 million a year ago. Operating profit for the six months also skyrocketed to RM120.4 million, up from RM21.4 million earlier, marking an improved operating margin of 9.6 per cent from a paltry 2 per cent.

The firm declared no dividend for the current quarter. Looking forward, Hartalega retains confidence in the long-term prospects of the global glove industry, driven by continuous healthcare needs and heightened hygiene standards. Nevertheless, the company anticipates ongoing challenges from global manufacturing oversupply, fierce price competition, and geopolitical instability.

Hartalega intends to address rising input costs through strategic price adjustments and further enhances manufacturing efficiency via automation and production upgrades. Plant 9, which was recently fully operational, and five production lines at Plant 3, reactivated by the end of Q2 FY27, are part of these efficiency enhancements.

The corporation plans to complete the gradual recommissioning of Plant 3 and subsequently Plant 4. Capital expenditure will primarily be allocated towards upgrading and automating manufacturing processes, incorporating AI-enabled technologies.