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Malaysia's Hartalega 1Q net profit nearly doubles on higher volume, better price

KUALA LUMPUR (Nikkei Markets) - Malaysian glove maker Hartalega Holdings said Tuesday its net profit in the fiscal first quarter nearly doubled, mainly due to an increase in sales volume and higher average selling price.

Net profit for three months ended Apr. 30 totalled 96.39 million ringgit ($22.49 million) compared with 56.18 million ringgit a year earlier, the company said in an exchange filing. Quarterly revenue rose 49.6% to 601.04 million ringgit compared with 401.83 million ringgit a year ago.

"We will begin commissioning the first production line at Plant 4 in August 2017 and the remaining production lines will be commissioned progressively," the company said. Plant 4 is scheduled to be completed in first quarter of calendar year 2018, it added.

To cater to higher demand, Hartalega is currently in the midst of building six manufacturing facilities for an estimated 2.26 billion ringgit. The eight-year Next Generation Complex project began in 2013 and is expected to lift its annual capacity to an estimated 42 billion pieces.

This year, the company plans to raise capital expenditure to between 300 million ringgit and 400 million ringgit from 240 million ringgit last year to fund expansion. Hartalega could produce up to 23 billion pieces a year, according to its latest annual report.

"The demand for rubber gloves remains in resurgent mood with demand supply dynamics in healthy balance," Hartalega said on Tuesday. "Hartalega NGC's capacity growth is on track to meet the increasing demand for rubber gloves."

Hartalega manufactures synthetic rubber gloves, while its larger rival Top Glove Corp produces natural rubber gloves. Malaysia supplies more than half of the global demand of natural rubber and synthetic gloves.

Cost of nitrile, which could account for as much as 50% of its total cost, is expected to remain steady at around $1 per kilogram until this year-end, Hartalega's managing director had said on July 26. The company will pass on any change in cost or savings to its customers, Kuan Mum Leong had said on the side lines of an investor conference.

Shares of Hartalega closed 0.3% lower at 7.15 ringgit on Tuesday, while the benchmark FTSE Bursa Malaysia KLCI ended 0.2% higher.

--Jason Ng

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