Hartalega reports 48% sales decline, expects 'strong headwinds' for gloves industry

KUALA LUMPUR, Malaysia—Hartalega Holding Bhd. expects "strong headwinds" for the rubber gloves industry as post-pandemic oversupply continues.

The Malaysia-based gloves maker reported a pre-tax loss of about $9.7 million (RM 45 million) for the quarter ended June 30, down from a pre-tax profit of $30.5 million the year before, according to average 2022 exchange rates.

First quarter sales declined 48 percent year-on-year to $87.3 million, primarily due to lower sales volume and average selling prices (ASPs), Hartalega said in an Aug. 9 news release. The group linked the loss to "the significant reduction in revenue," as well as higher operating costs despite lower raw material costs.

In addition, the group recognized a provision for severance pay of $10 million following the decommissioning plan announced in May.

Commenting on the near-term outlook of the market, the gloves maker said it expected strong headwinds as the global oversupply situation persists.

"Aggressive capacity expansion by regional players, coupled with excessive inventory build-up during the pandemic have led to the current market supply-demand imbalance," Hartalega said.

Meanwhile, it said, the industry saw operating margins impacted by increased operating costs, such as higher energy and labor costs over the recent months.

Furthermore, rubber glove pricing remains competitive while manufacturers have "minimal success" with incremental costs passthrough.

"Although capacity rationalization is expected to continue, the challenging landscape is likely to persist for the time being," the company said.

The group is currently undergoing a five-year rationalization program, following which it expects to see improvement in operational and cost efficiencies.

Over the longer term, Hartalega said, despite the ongoing market challenges, glove consumption is expected to grow with increased usage, especially from emerging markets.

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