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Rubber glove makers upbeat on weaker ringgit, automation (03-09-2015)

 

KUALA LUMPUR -- Hartalega Holdings and Top Glove Corp., the two Malaysian rubber glove makers, are reaping the benefits of adopting new technologies and the ringgit`s slide against the dollar.  

CK TAN, Nikkei staff writer

One of Hartalega`s fully-automated plants

KUALA LUMPUR -- Hartalega Holdings and Top Glove Corp., the two Malaysian rubber glove makers, are reaping the benefits of adopting new technologies and the ringgit`s slide against the dollar.

     The companies, who are both global leaders in their segment, are continuing to expand production capacity and, by making more processes automatic, have managed to cut costs and raise productivity.

     The weakening price of rubber -- their main raw material -- is resulting in lower prices per unit, but they are also selling in bigger quantities. Since most of their products are exported, the recent strengthening of the U.S. dollar against the ringgit has boosted both companies.

Gloves are automatically stripped off from their molds. Automation has contributed to higher efficiency and earnings at Top Glove.

 

 

   "They are all very happy and satisfied with what we have done," Kuan Kam Hon, Hartalega`s executive chairman, said of the mood of his company`s investors after chairing a shareholder meeting on Aug. 25.

     The company posted a record turnover of 1.145 billion ringgit ($276 million) for the fiscal year through Mar. 31. The momentum continued into the April to June quarter, when net profit jumped 8% on the year to 62 million ringgit on higher sales volumes.

     Hartalega is the world`s largest synthetic rubber glove maker, with an annual production capacity of 16 billion pieces. At its state-of-the-art plants -- known as the Next Generation Integrated Glove Manufacturing Complex (NGC) in Sepang near Kuala Lumpur`s international airport -- it is adding two new production lines a month in order to reach a target of 42 billion pieces by 2021. The 2.2 billion ringgit expansion project was kicked off two years ago when it deemed demand for nitrile synthetic rubber gloves, which are widely used in the healthcare industry, would grow faster than for natural rubber gloves.

     At NGC, the robotic arms in the manufacturing plant churn out 45,000 gloves an hour compared to just 10,000 pieces before full automation. This has cut overhead costs and drastically increased productivity.

     Hartalega, which sells to 39 countries worldwide, said the current weakening of the ringgit may not necessarily translate into huge profit, as customers will demand discounts. "It is not all that rosy since the U.S. dollar very quickly became very strong of late," Kuan said. "When the exchange is so far apart and the gains are so great, you don`t expect the customers to just sit there and do nothing," he added.

     But Public Investment Bank said in a recent research note that the long-term strengthening of the dollar, which has gained 11% against the ringgit since July, would bode well for the group as receivables are dollar-denominated. Hartalega expects sales growth from the U.S., which bought 48% of its nitrile gloves last year, followed by Europe and Asia, particularly China and Japan.

     Similarly, rival Top Glove also anticipates global demand for gloves to grow, specifically between 5% and 8% annually, due to better hygiene practices and the affordability of the gloves.

http://asia.nikkei.com/Business/Companies/Rubber-glove-makers-upbeat-on-weaker-ringgit-automation

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