Hartalega makes ‘difficult decision’ to shut Bestari Jaya facility
Published on: Monday, May 08, 2023
By: FMT Business
Hartalega’s Bestari Jaya facility consists of four production plants with 40 production lines, some of which have been in operation since 2004.
PETALING JAYA: Glove marker Hartalega Holdings Bhd announced today it would be decommissioning its production facility in Bestari Jaya, Selangor, which would lead to an impairment loss of RM347 million for FY2023.
In a Bursa filing today, the group said this was a “difficult yet necessary decision to ensure that Hartalega will be able to weather the tough market landscape”.
ADVERTISEMENT “The company is of the view that it is more strategic and viable in the long term to consolidate operations at the NGC facility [in Sepang],” it said.
The decommissioning, expected to be completed by end-2023, was part of the group’s five-year strategic plan to undertake operation rationalisation to improve competitiveness.
Upon the closure of the Bestari Jaya (BB) facility, the group will consolidate operations at its ‘next generation integrated glove manufacturing complex’ (NGC) in Sepang.
The BB facility consists of four production plants with 40 production lines, some of which have been in operation since 2004.
ADVERTISEMENT The filing did not indicate how many staff at the BB faciity will be affected but the company’s 2022 annual report said its total workforce stood at 9,040 as of March 31, 2022.
“Compared with our state-of-the-art production lines at our NGC facility, our Bestari Jaya facility is less efficient and restricted by older technology, generates higher energy and labour costs, in addition to higher maintenance costs due to the age of the facility,” said CEO Kuan Mun Leong in a statement.
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“Once the decommissioning is completed, the company expects a reduction in operating cost and depreciation, which will have a direct benefit on its bottom line,” he added.
He noted the NGC facility also has the capacity for future expansion in line with prevailing market supply and demand dynamics.
A promise to employees
Kuan said Hartalega is committed to treating the affected employees fairly via measures including redeployment opportunities, competitive severance package offers, as well as human resource assistance and counselling.
In addition, the group promised helpdesk support and assistance from their relevant human resource (HR) departments. This is to help answer queries as well as provide counselling for affected employees.
In addition to the RM347 million impairment loss for FY2023, the group expects further provisions for retrenchment and contract obligation expenses will amount to RM70 million for FY2024.
At 4.18pm, Hartalega’s share price fell 7.6% or 15 sen to RM1.82, giving it a market capitalisation of RM6.24 billion.
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