China's peers in ASEAN set up factories, Hartalega is not afraid of challenges.

(Kuala Lumpur, 6th) Facing the Chinese counterparts who are about to set up factories in Southeast Asia, Hartalega (HARTA, 5168, main board healthcare stock) said it is not afraid of challenges and believes that Hartalega, which has been deeply rooted for many years in an equal environment, has absolute competitiveness.

Guan Jin'an, the executive chairman of Hartalega, pointed out at a press conference after today's shareholders' meeting that starting from 2026, the US will significantly increase import tariffs on Chinese gloves, which may not be a good thing for Malaysian glove manufacturers.

"Because some Chinese counterparts have planned to expand into Southeast Asia, such as setting up factories in Indonesia, to avoid the soaring US tariffs."

In any case, Guan Jin'an appears confident and believes that Hartalega has sufficient strength to confront Chinese players head-on.

After Chinese companies enter the Southeast Asian market, we are in a fair competitive environment with Chinese glove manufacturers. We have been operating in this region for decades and are well aware of the local culture and business practices, while they need time to start from scratch. So, we are not worried about the arrival of Chinese companies.

Kuan Chin-An also said that Chinese glove manufacturers have the advantage of lower energy costs and better manpower quality in China, but these advantages will disappear after entering the Southeast Asian market, putting both parties on an equal footing.

Chinese workers are hardworking and can take on multiple roles, while the productivity of the workforce in this region is generally lower.

Regarding the progress of Chinese counterparts entering Southeast Asia, Heejia CEO Guan Minliang revealed that relevant companies will not enter Malaysia, but some have purchased land in neighboring countries and are preparing to establish factories.

In May of this year, the United States announced that it will significantly increase the import tariffs on Chinese glove products from 7.5% to 25% starting from 2026.

Most market observers estimate that this move by the United States will narrow the price gap between Malaysian and Chinese gloves, making Malaysian gloves more competitive in the key U.S. market.

According to Heejia's latest annual report, the North American market contributed 48% of the company's sales.

In addition, Guan Minliang pointed out that there is still an oversupply issue in the glove market, especially in Malaysia. Under the mutual influence of various factors, the glove market will continue to be turbulent in the future and may take one to two years to recover to normal by 2026.

At present, China's production capacity is fully utilized, so some glove demand has flowed back to Malaysia, but not all local glove manufacturers have benefited. For example, our production capacity utilization is currently at the level of 75% to 80%, but other local peers may only have 50% or even less than 50%.

He added that in the case of market demand recovery and glove manufacturers increasing production while simultaneously ceasing production on backward production lines, the supply and demand relationship in the glove market is constantly changing, and it will take some time for it to normalize overall.

Meanwhile, considering the new production capacity brought by Chinese companies expanding to Southeast Asia, Guan Jin'an believes that the global glove production capacity will increase more than expected in the next two years.

The expansion plan of Chinese companies to Southeast Asia is unexpected, so in the next two years, the growth rate of global glove production capacity will be faster than expected, making the supply and demand balance in the glove market more complex.

Regarding Hartalega's expansion plan, Guan Minliang stated that the company has allocated a capital expenditure of 0.2 billion ringgit for the next 12 months, with 0.17 billion ringgit used for expansion and the remaining amount used for further development of automation systems.

Our expansion plan is actually to gradually use the previously idle SBP Plant 8 and Plant 9, mainly to replace the old production lines of Beading Yan Dai that were shut down last year.

He added that considering the current oversupply environment, Hartalega does not have any new expansion plans after restarting Plant 9.

"We are very cautious about expanding production, as we do not want to disrupt the balance and worsen the problem of oversupply."

Kuan Ming Liang stated that Hartalega currently has a monthly average sales of 2.2 billion gloves, and the company's goal is to increase the monthly average sales to 2.7 billion gloves by the end of the 2025 fiscal year (ending in March).

When asked about the impact of a weak US dollar on Hartalega, Kuan Ming Liang pointed out that the unexpected strengthening of the Malaysian Ringgit would indeed affect the performance, but the company adjusts glove prices every month, so it would pass on the impact of forex by increasing prices to customers.

"Therefore, under the influence of the stronger Malaysian Ringgit and the rising costs of natural gas, our average glove selling price will enter an upward trend."

Today, Kuan Ming Jing, Hartalega's Chief Commercial Officer, also attended the press conference.