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KUALA LUMPUR: Hartalega Holdings Bhd is spending RM1.9 billion to set up a new factory that will quadruple its annual capacity to 38.2 billion rubber gloves over the next eight years from 9.7 billion currently.
In an announcement to Bursa Malaysia, the glove manufacturer said its expansion plan would consist of 72 new high tech production lines — which has been accorded Entry Point Project status under the government’s Economic Transformation Programme.
The mega expansion project will be spread over two four-year phases and employ about 5,000 workers. Phase one will be constructed between this year and 2017. It will consist of 42 production lines with a total annual capacity of 16.5 billion rubber gloves.
The second phase, to be constructed between 2018 and 2021, will see a further 30 production lines added — with an annual capacity of 12 billion rubber gloves.
Hartalega noted that its current operations were expected to continue to generate net cash flow and reserves for the foreseeable future, which would be sufficient to fund the entire construction of the new factory without relying significantly on bank borrowings.
Hartalega’s wholly owned unit, Hartalega NGC Sdn Bhd (HNGC), entered into an agreement with Tanjung Balai Sdn Bhd yesterday, to buy three plots of land measuring 120 acres (48.5ha) from the latter, for RM97 million, according to the announcement. The parcels of land are in Labu, Sepang.
Tanjung Balai is a subsidiary of the Tanjung Balai group, whose main business involves trading in construction materials, transportation, earthwork and road works.
The first plot measures about 95 acres and is valued at RM93.1 million. The second, measuring about 17 acres, is valued at RM3.7 million while the last parcel measures some 7,000 sq ft and has a value of RM168,000.
Hartalega said the acquisition would be funded by a mix of internally generated funds and bank borrowings.
“The factory will be housed within a new site of about 95 acres with several dedicated buildings or facilities to be built, including six manufacturing facilities, a learning and development centre and employees’ accommodation,” it said.
HNGC will be involved in the manufacturing of both natural and synthetic rubber gloves. The incorporation of HNGC is in line with the group’s business strategy of building new glove production capacities, leveraging on new in-house developed technologies, said Hartalega.
“The acquisition will enable the company, to progressively expand its production capacities to meet the current and future growing demand for its products,” it added.
The acquisition is not expected to have a material effect on the group’s net assets, earnings and gearing for the current financial year ending March 31, 2014.
“Management is of the view that the acquisition is expected to benefit the company in the medium to long term, by enabling the expansion of its production capacities to capture a bigger share of the growing demand for gloves,” said Hartalega.
The land acquisition is estimated to be completed within three months.
This article first appeared in The Edge Financial Daily, on June 13, 2013.
