KUALA LUMPUR – Hartalega Holdings Bhd will be decommissioning its Bestari Jaya production facility which involves shutting four production plants as part of its operational rationalisation plan, Hartalega said in a statement today.
The glove maker said it would then consolidate operations at its next-generation integrated glove manufacturing complex (NGC) in Sepang.
Chief executive officer Kuan Mun Leong said the exercise is a “difficult yet necessary decision” to ensure that Hartalega can weather the tough market landscape. Some of the plants have been operational since 2004. The exercise is expected to be completed by end-2023.
“Given the challenging market conditions, we have put in place a five-year strategic plan to reinforce business resilience and long-term sustainability.
“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,” he said.
Kuan said during the exercise, the group would be committed to treating the affected employees fairly and with respect via measures including redeployment opportunities, competitive severance package offers, outplacement support and helpdesk, as well as human resource assistance and counselling.
He said once the decommissioning is completed, the group would expect a reduction in its operating cost and depreciation, which would have a direct benefit on its bottom line.
The exercise would ultimately lay the groundwork to enhance cost optimisation and strengthen operational efficiencies, leveraging the higher line speed and technological advancements at its NGC facility, he said.
“Taking a longer-term view, our NGC facility also has the capacity for future expansion as we continue to progress strategically in line with prevailing market supply and demand dynamics,” he said.
Following the exercise, Hartalega expects to recognise an impairment loss of RM347 million for the 2023 fiscal year, and further provision for retrenchment costs and contract obligation expenses amounting to approximately RM70 million for financial year 2024. – Bernama, May 8, 2023
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