6 Key Things To Note From Hartalega Holdings Berhad’s Latest Earnings
June 30, 2021
Hartalega Holdings Berhad (KLSE: HARTA) ended its financial year ended 31 March 2021 on a high note.
The world’s largest nitrile glove maker saw its revenue, net profit and cash flow surge due to resurgence in global Covid-19 cases, pent-up buyer demand and supply shortages.
Here are 6 other interesting facts about the group’s latest earnings and recent corporate developments that investors should know about.
1. Record full-year revenue of RM6.70 billion
For the 12 months ended 31 March 2021, the group achieved a record revenue of RM6.70 billion, an increase of RM3.77 billion or 129.0% from the corresponding period in the preceding year. The higher sales revenue was mainly contributed by the increase in average selling price as well as sales volume.
Revenue for the quarter Q4 FY2021 amounted to RM2.30 billion, representing an increase of RM170.0 million or 8% as compared with the preceding quarter of Q3 FY2021. The higher sales revenue was attributable to the increase in average selling price for the quarter. This was partly offset by volume reduction due to challenges faces on shipment availability caused by the global container shortages as well as the temporary shutdown of certain production lines as a preventive measure and safety precaution in dealing with Covid-19 cases.
2. Record full-year net profit of RM2.89 billion
For the 12 months ended 31 March 2021, the group’s net profit soared to RM2.89 billion from RM433.62 million in the previous year. The higher net profit was mainly due to higher sales revenue, better production efficiency, after offsetting higher raw material prices.
Comparatively, net profit for the quarter Q4 FY2021 grew 11.73% to RM1.12 billion from RM1.00 billion in the immediate preceding quarter Q3 FY2021.
3. Surge in operating cash flow and free cash flow
For the 12 months ended 31 March 2021, the operating cash flow of the group surged to RM3.09 billion from RM655.72 million for the preceding year.
Meanwhile, free cash flow for the 12 months ended 31 March 2021, swelled to RM2.73 billion from RM412.22 million for the preceding year.
The glovemaker is flushed with cash as cash and cash equivalents have enlarged to RM2.67 billion as of 31 March 2021.
4. 3rd interim single-tier dividend of 17.70 sen
The group had declared a third interim single-tier dividend of 17.70 sen for the full financial year ended 31 March 2021, with the entitlement date on 24 May 2021 and payment on 9 June 2021, bringing total dividends for the year to 31.20 sen per share.
By contrast, Hartalega declared a dividend of 2.05 sen per share in Q4 FY2020, and total dividends for the full financial year ended 31 March 2020 amounted to 7.55 sen per share.
5. Hartalega to implement “Green Barrier Strategy” to minimize the risk of infection within its operations
To ensure the group continues to deliver gloves to front-liners globally without disruption, the group will continue to enforce Covid-19 preventive measures that were put in place to minimize the risk of infection within the operations in Malaysia.
These include implementing the “Green Barrier Strategy” to further improve segregation measures, enforcing social distancing measures, awareness programme, entry screening procedure, installing thermal scanners at high traffic locations, staggered shift hours and frequent sanitizing at common areas.
To aid the nation’s fight against the pandemic, the group has fulfilled its pledge to contribute RM90.00 million to the government Covid-19 fund in the month of February 2021.
6. Hartalega to invest RM7 billion for 16 new glove factories in Kedah
Hartalega will be investing RM7 billion to build 16 new glove factories in Malaysia’s northern region over the next 20 years.
As part of the expansion, the glove manufacturer’s wholly-owned subsidiary inked a sale and purchase agreement today with Northern Gateway Free Zone Sdn Bhd – a subsidiary of Minister of Finance Inc-owned Northern Gateway Sdn Bhd – for 250 acres (101.17ha) of land in the Kota Perdana Special Border Economic Zone (SBEZ) in Bukit Kayu Hitam, Kedah.
Both parties have also signed an option agreement for Hartalega to purchase another 130 acres or 52.51ha of land in the same location. Northern Gateway is the master development of SBEZ.
The purchase price of the land is RM228.7 million, and will be funded through Hartalega’s internal funds and/ or existing credit facilities. The first plant is expected to be completed in 2024.
As it currently stands, Hartalega produces 43 billion pieces of gloves per year. Its expansion plans include the NGV 1.5 in Sepang, which will boost its capacity to 63 billion pieces per year once it is completed.
With this longer-term expansion in Kedah, Hartalega will add another 80 billion pieces per year, resulting in its total capacity rising to 143 billion pieces per year once fully completed.
Hartalega chief executive officer Kuan Mun Leong said in view of the long-term structural step-up in global demand, the group’s production capacity must be accelerated. He noted that its growth strategy remains focused on Malaysia given the existing comprehensive ecosystem and supply chain for the sector, with its expansion plan to solidify the country’s status as the largest glove manufacturer globally.
Immediate prospects and targets
In line with the growing rubber glove demand globally, Hartalega will continue to expand its capacity in NGC, Sepang. To date, 6 out of 10 lines in Plant 7 have been commissioned. Upon full commissioning, Plant 7 will have an annual installed capacity of 2.7 billion pieces. In addition, construction for the upcoming expansion, NGC 1.5 is currently underway and the group targets to commission the first line by December 2021.
NGC 1.5 expansion plans include 4 additional production plants which will contribute 19 billion pieces to the annual installed capacity. With these expansion plans in place, the group’s annual installed capacity is expected to increase to 63 billion pieces over the next 2 to 3 years.
On the global front, several countries are facing new surges of Covid-19 outbreak, especially in South America, Middle East and South-East Asia region. As a result of the pandemic, the demand for medical supplies, such as gloves, is expected to remain elevated in the immediate term. Post pandemic, the sector is expected to undergo a structural step-up in demand on the back of increased glove usage from emerging markets with low gloves consumption per capita and heightened hygiene awareness.
An accountant by training, F.I.R.E 2030 is a student of value investing since 2012. She believes that successful investing requires discipline and patience. But with the right knowledge and temperament, ordinary investors can achieve extraordinary results. These articles are her journals on stocks and the investing journey toward financial freedom in 2030.