Business

Tuesday April 14, 2009

Hartalega rises to second place

By C. S. TAN


It surpasses Kossan after strong run in share price

PETALING JAYA: The release of buoyant results of industry leader Top Glove Corp Bhd last week has confirmed that global demand for rubber gloves continue to be firm.

This remains one of the country’s best-performing manufacturing sub-sectors as demand for gloves is still increasing in the healthcare industry, in spite of the global recession.

Most of the industry’s output is exported and much of it is used in the healthcare sector.

Top Glove Corp Bhd set the tone with the results for its second quarter ended Feb 28, 2009, which showed its net profit grew 22% to RM36mil.

At the same time, its net profit margin expanded to 10.4% from 7.8% last year.

The company attributed the significant increase to improvements in cost efficiencies and quality, as well as favourable latex prices and exchange rates.

While latex prices are rising, they are still lower than the high prices of last year when prices did not drop till October.

For the moment, further upside of rubber prices may be capped until a strong recovery in the global tyre industry. For the time being, the rest of the industry is also expected to show improved profit margins as demonstrated by Top Glove.

Hartalega Holdings Bhd, which was just listed last year, made a strong run in its share price after its first-quarter results were released in February.

That enabled it to surpass Kossan Rubber Industries Bhd in market value. Hartalega’s market value was about RM650mil compared with Kossan’s RM510mil yesterday.

One reason that investors bought up Hartalega could be that its net profit of RM22.2mil for the Oct-Dec quarter exceeded the RM15.9mil earned by Kossan in the same quarter.

Hence, on that score, Hartalega became the second-most profitable glove maker in that quarter.

Hartalega’s margins and earnings for its fourth quarter are expected to improve further in view of the favourable raw material prices as well as contribution from the rest of the capacity in its plant four that became fully operational in November.

Similarly, Kossan embarked on a steady expansion of its capacity.

Its 11 new lines in a new plant in Klang are progressively coming into commercial production, with all lines in operation from around July.

The second half of the year will thus see the full impact of this expansion.

Equally important, all these new lines will produce nitrile (synthetic rubber) gloves, which offer higher profit margins than natural rubber gloves.

Supermax Corp Bhd, which had carried the burden of its investment in APL Industries Bhd (APLI), wrote off that investment to zero value in the Oct-Dec quarter.

As pointed out by Supermax, it made a net profit of RM18.2mil in the Oct-Dec quarter before the APLI write-off but only RM1.5mil after the write-off. It is thus positioned to start on a clean slate this year.

 
TOPGLOV :  [Stock Watch]  [News]
HARTA : [Stock Watch] [News]


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