Hartalega: Not impacted by rising natural rubber cost
Q&A with Hartalega executive director Kuan Mun Keng
TEFD: On concerns over rising rubber costs and whether there is a drop in demand for rubber gloves.
Kuan: The fact remains that price of rubber is indeed volatile. Customers are well aware of this, and as such, the industry is able to pass on the costs to the customers.
Fortunately, Hartalega is primarily focused on nitrile gloves. Hence we are not largely affected by the impact of rising natural rubber costs.
As a matter of fact, the switch by customers, particularly in the acute healthcare sector from natural rubber to nitrile gloves, is ever more evident.
This is due to nitrile gloves being well accepted by our customers due to their high quality and competitive pricing. The trend is expected to continue because of the higher pricing of natural rubber gloves compared to nitrile gloves.
TEFD: Has there been an easing in orders from the US?
Kuan: Not at all. Given the switch from natural rubber to nitrile gloves, US orders have grown exponentially.
TEFD: Are the China and developing world markets still growing?
Kuan: China is most definitely a potential market. However, as China undergoes its healthcare reform, there will still be some lag time before China becomes a primary market for glove manufacturers.
TEFD: Has the company been expanding production capacity?
Kuan: Most certainly. Our expansion plans, particularly in the form of our fifth plant, is well underway. By the end of 2010, 10 new high-capacity lines will be up and running.
Additionally, we will also be investing in the refurbishment of our existing lines in Plant 1 by the fiscal year 2011. Upon completion, this is expected to boost our production capacity to 9.5 billion pieces a year by financial year ending March 31, 2012.
TEFD: How will the company manage the excess capacity if demand falls?
Kuan: Hartalega is the most efficient glove producer in the sector as its patented proprietary technology bodes well in terms of productivity.
As such, our on-going improvement and development of our technology have enhanced our competitive advantages for greater margins and profitability.
However, even if the demand for gloves does fall, it would only be short-lived as the healthcare sector in emerging markets are constantly switching from natural rubber to nitrile gloves.
As Malaysia’s largest nitrile gloves producer, we are in a better position to address the weakening of the US dollar (USD) and the looming excess capacity from natural rubber.
Already, we are winning market share over natural rubber. Moreover, nitrile material cost is USD-based, therefore the weakening USD is an advantage as we do not need to increase the price.