Corporate Presentation 2014 - INSAGE · Corporate Presentation 2014 Scaling greater heights . Growing Global ... 1,782 3,542 5,285 2008 2009 2010 2011 2012 2013 . Growing Global

Growing Global

………………………………………………………………………………………………………………………………………………………………………………….. Innovation Quality

Corporate Presentation 2014

Scaling greater heights

Growing Global


Our markets

Manufacturer of rubber

examination and surgical gloves

World’s largest nitrile glove

manufacturer

Export to 39 countries globally

Four overseas offices

• Australia (1996)

• USA (2003)

• China (2012)

• India (2013)

2

Growing Global


USA, 51%

EU, 29%

APAC, 12%

Others, 8%

Healthcare, 76%

Laboratory, 17%

Food, 5% Industrial,

2%

Our markets

3

Growing Global


Global Recognition

2013 2010, 2011, 2012 & 2013 2013 2010 & 2012

HR Asia Best

Employers to Work for

in Asia

Forbes Asia 200 Best

Under a Billion

The Edge Billion

Ringgit Club – Most

Profitable Company in

Industrial Products

Segment

Asiamoney Best

Managed Company in

Malaysia

4

Growing Global


National Corporation Innovation Index (NCII) participating company

“The NCII would show and benchmark where and

how these corporations are active in innovation at national and international levels. These

benchmarking activities are crucial as these

corporations are the significant players in the market

and they are needed to drive the economy.”

5

Growing Global


Revenue and Profit

110 160 240 282

443 572

735

921 1,032

1,107

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Revenue (RM mil)

13 19 37 40

85

146

190 201 234 234

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Profit After Tax (RM mil)

6

CAGR for revenue from FY2005 to FY2014 of

29%

CAGR for PAT from FY2005 to FY2014 of 37%

Net margin improved from 12% in FY2005 to

21% in FY2014

Sales and PAT for FY2014 of RM1107 mil and

RM234 mil respectively

FY2014 EPS of 31.3 cents

Highest profit margin in the industry

Highest net profit in the industry

Growing Global


Hartalega Dividend Growth

Dividend per share is stated post-bonus issue*

1.7

4.0

6.7

10.5

12.5

14.5 14.5

10.4%

22.9%

33.9%

40.1%

45.2%

45.5%

45.5%

FY08 FY09 FY10 FY11 FY12 FY13 FY14

DPS (sen) Payout Ratio

7

Pay-out ratio has increased since listing

from 10.4% to 45.5%

Although number of shares have grown,

DPS has also grown from 1.7 cents to 14.5

cents*

4 pay-outs per annum

Growing Global


Sector leader

World‘s largest nitrile glove

manufacturer.

Valuable Glove Company in

Malaysia (current market cap of

RM4.4 billion)

Highest Productivity in the Industry.

World‘s fatest production line at

45,000 pcs/hr.

Most advanced in-house developed

production technologies.

Most Innovative Glove Company.

5 breakthrough inventions that

changed the landscape of glove

industry.

341

1,263 1,629 1,782

3,542

5,285

2008 2009 2010 2011 2012 2013

8

Growing Global


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

5.00% 10.00% 15.00% 20.00%

Net Margin

CAGR

Kossan Top

Grove

Supermax

Hartalega

4-yr CAGR

5-yr avg net

margin

Hartalega 18.0 23.3

Kossan 11.7 9.3

Supermax 8.8 13.2

Top Glove 10.9 9.3

Sector leader

Source: Deloitte & Touche, 2014

9

Growing Global


Sector leader

10

No 1 No 2 No 3 No 4

Margin

PBT margin Hartalega

27.9%

Kossan

13.9%

Supermax

13.8%

Top Glove

10.5%

Net margin Hartalega

21.1%

Supermax

11.5%

Kossan

11.0%

Top Glove

8.8%

Profitability

Return on assets Hartalega

36.8%

Supermax

24.9%

Kossan

24.1%

Top Glove

22.7%

Return on equity Hartalega

24.8%

Kossan

19.9%

Top Glove

14.9%

Supermax

14.4%

Working capital

Inventory turnover Hartalega

32.4

Top Glove

34.7

Kossan

41.7

Supermax

69.7

Trade receivable turnover Hartalega

43.6

Top Glove

44.6

Kossan

64.3

Supermax

74.8

Debt

Debt equity ratio Hartalega

0.5%

Top Glove

4.3%

Kossan

20.7%

Supermax

34.9%

Total liabilities to total assets Hartalega

14.5%

Top Glove

23.4%

Kossan

34.2%

Supermax

34.6%

Source: Deloitte & Touche, 2014 – based on companies latest financial year results

Growing Global


Changed the global glove market

Year 2005

11

Before year 2005 Year 2010 Year 2013

Nitrile glove < 5%

global market

Limited usage in

medical sector

Hartalega invented

light weight nitrile

glove

Launched in USA

Hospitals started to

switch from NR to

NBR

EU revised

regulatory standards

Users in EU started

to switch from NR to

NBR

NBR glove market

share increased

from 5% to 50%

Most hospital in US

use NBR gloves

Growing Global


Competition

12

“Glove makers are continuing to ramp up production of nitrile gloves as they compete

for market share…” The Edge 30th Jan 2014

“Fighting to dominate the nitrile glove sector” RHB Analyst report 29th April 2013

“A nitrile glove price war looming ahead” Affin Investment Bank Analyst report 6th April 2012

“Malaysian glove makers to invest RM300mil to RM500mil to improve automation”

The Star 5th Sep 2012

“Technology and automation are expected to be the game changer to move the industry

forward” Lim Kuang Sia, CEO of Kossan in interview with The Sun on 14th May 2014

Growing Global


OUR STRATEGY

13

Growing Global


Four pillars of growth

14

Engaging critical mass

Knowledge management

Competencies development

Succession planning

Capacity expansion (NGC)

Lean manufacturing

Invest in Information Technology

Production technologies

Product innovations

Innovative culture at all levels

Develop own brand market

Emerging markets like China

and India as target markets

Vision to build a global

multiple medical device

company

Innovation

Own Brand

Human Resource

Productivity

Growing Global


Innovation – Working on 5 new major innovations

15

Blank To Protect Proprietary Value

Growing Global


Talent development

16

Senior

Management

Management

Executives, Supervisors

(critical mass)

Leadership development program

by

Skills development and lean

manufacturing

Growing Global


Investment in Information and Communication Technology

Most admired companies in the world use IT to create

competitive advantage

Hartalega’s IT is an integral part of our operating

systems

Existing in house developed real time information are

accessible on mobile device

Extending our IT focus, we engaged Avanade, a global

joint venture company between Microsoft and

Accenture to further develop our IT systems

RM20 million IT transformation project

Focussing not only on efficient business processes but

also on people development tools like knowledge

management and team collaboration

17

Growing Global


Our Own Brand

18

Blank To Protect Proprietary Value

Growing Global


Sales growth in China

Sales in China grew by an average of

253% over the past 2 years

Expect further significant sales growth in

China

Per capita consumption of gloves is still

low in China, about 4 pieces per capita

compared to US of 141 pieces and

Europe of 100 pieces

19

959,516

4,783,371

9,915,858

20,000,00

0

FY12 FY13 FY14 FY15E

Growing Global


RM2.2bil Integrated Glove Manufacturing Campus

An Entry Point Project (EPP) under the ETP

RM2.2 billion investment

112 acres site at Sepang

95 acres industrial land, 17 acres lake

High technology and integrated

Conducive work environment

6 high tech manufacturing plants

72 fastest production lines in the world

Designer built offices

Centre of excellence comprising training and

R&D centre

Sports and recreation complex

Employees’ accomodation

20

Growing Global


• Innovation based high tech

manufacturing technology

• Product innovation

• High productivity

• Environmentally sustainable

High level productivity leading

to increased GNI

contribution and affordability

in providing high paying

jobs

High paying jobs

Human resource focus

High technology

Adopting world class HR best

practices

Holistic talent development and

management programs

NGC’s Investment Vision

21

Growing Global


Built on most advanced proven proprietary technology

NGC – total 72 production lines; average output per line is 45,000 pcs/hr

45,000 pcs/hr

7,000 pcs/hr

12,000 pcs/hr

30,000 pcs/hr

45,000 pcs/hr

Bestari Jaya – total 55 production lines; average output per line is 28,000 pcs/hr

22

Growing Global


High paying jobs

Hartalega not only invests in R&D and technologies but also its people

Talents are crucial to ensure good operation and management of more sophisticated

technologies that Hartalega uses

Above market remuneration to reward existing employees and to attract more talents

4,727,738

2,820,753

2,211,424

1,545,986

963,657

- 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000

Director

Senior Manager

Manager

Assistant Manager

Executive

5 years maximum income (year 2010 to 2015)

23

Growing Global


High paying jobs – extended ESOS program

With NGC’s contribution to earnings growth

ESOS program can be extended to Technician level

Inclusive shares options scheme instills ownership and drives better performance

3,462,400

2,122,680

1,553,448

1,164,960

659,976

426,984

273,240

- 1,000,000 2,000,000 3,000,000 4,000,000

Director

Senior Manager

Manager

Assistant Manager

Executive

Supervisor

Technician

5 years maximum income (year 2015 to 2020)

24

Growing Global


Reinvest in people – knowledge is the key

Floor space of 40,000 sq ft is allocated in NGC for a

learning center

Learning program focussed at development of

workforce’s functional and soft skills

As Hartalega embarks on ambitious advancement in

technology, knowledge workforce is crucial to ensure

success

In collaboration with learning agencies such as MARA

and SHRDC (MOU signed)

Learning centre is open to community use

25

Growing Global


Quantum leap in productivity – workers per output

26

*unit measurement used is worker per million pieces of gloves produced per month

*sector average and listed companies figures from news releases and company’s quarterly and annual reports

33% jump in productivity at NGC compared to Hartalega’s exisitng setup

Sets a new benchmark for the sector – NGC is 45% higher in productivity compared to other listed companies

Further automation and lean manufacturing practices will improve productivity at NGC by another 23%

Hartalega NGC

Sector average

Average of listed glove companies

in Malaysia (ex-Hartalega)

Hartalega’s existing setup

7.5

4.7

3.9

2.6

Hartalega NGC with further automation

and lean manufacturing practices 2.0

Growing Global


Intensified

competition

Capacity projection

Average capacity growth of 15% for the next 6 years

First production line at NGC is expected to begin operation in November 2014

Subsequent production capacity will come on stream progressively

27

11,787 12,900

18,426

24,993 29,739

34,258 35,307

0

10,000

20,000

30,000

40,000

FY14 FY15 FY16 FY17 FY18 FY19 FY20

Projected output (mil pcs)

Growing Global


MARKET OUTLOOK

28

Growing Global


Intensified

competition

Market outlook

World demand for rubber gloves grow

at an average of 8% per annum

Malaysia is the largest supplier of

rubber gloves for the world – 63%

market share

Demand of glove is inelastic

Nitrile is preferred choice for

developed markets

29

2.2 2.3 2.3 2.6 2.8 3.1 3.4 3.9

4.7 4.4

5.5

6.4 6.7 6.7

64 68

84 92 94

102 110

122 124

140 150 148

160

172

World's Import of Examination Gloves (US$ Bil)

World's Import of Examination Gloves (Bil pcs)

Growing Global


Intensified

competition

Market outlook

Asia’s per capita consumption of gloves is significantly lower than US and EU

China’s ongoing healthcare reform is expected to drive up glove demand substantially

If China’s per capita glove consumption equaled that of EU, demand would be 132 billion pieces per

annum, almost equivalent to the current combined global consumption

30

4.8

4.6

98

149

0 50 100 150

Asia

China

EU

USA

per capita glove usage (pcs)

Growing Global


Intensified

competition

Market outlook

Developed markets had limited growth in import of natural rubber gloves

Emerging markets like South America and China registered strong growth in natural rubber gloves

China also registered significant growth in nitrile gloves

Malaysia’s export ratio of natural rubber to nitrile glove has reached 50:50

US natural rubber – nitrile import ratio for year 2013 was 24:76

EU natural rubber – nitrile import ratio for year 2013 was 46:54

31

2011 (mil pairs) 2012 (mil pairs) 2013 (mil pairs) % change (2012 to 2013)

Destination Latex Nitrile Latex Nitrile Latex Nitrile Latex Nitrile

USA 3,640 7,620 3,446 9,649 3,253 10,587 (5.6%) 9.72%

EU 6,351 4,437 5,865 5,352 5,918 7,040 0.90% 31.53%

Japan 777 1,033 737 1,394 721 1,752 (2.1%) 65.32%

South America 2,868 173 3,106 175 3,894 180 25.30% 2.85%

China 357 132 542 182 789 293 45.50% 60.98%

Table: Malaysia Export of Rubber Gloves (source: MREPC)

Growing Global


Market outlook

Import ratio of natural rubber to nitrile glove for US and

EU is 24:76 and 46:54 respectively

EU import of nitrile is expected to grow further

Asia’s per capita consumption of glove is substantially

lower than US and EU (about 30 times lower)

Future demand growth will be driven by emerging

markets such as China and India

Hartalega is well positioned to tap into opportunities in

emerging markets with our branding strategy and NGC

All lines at NGC are interchangeable for production of

nitrile or natural rubber glove

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Documents

Corporate Presentation 2014 - INSAGE · Corporate Presentation 2014 Scaling greater heights . Growing Global ... 1,782 3,542 5,285 2008 2009 2010 2011 2012 2013 . Growing Global