PETALING JAYA: As part of Hartalega Holdings Bhd’s commitment towards sustainable long-term growth, the group will decommission its facility in Bestari Jaya, Selangor, with operations to be consolidated at its Next Generation Integrated Glove Manufacturing Complex (NGC) in Sepang.
Decommissioning of the Bestari Jaya facility, which comprises four production plants, some of which have been operational since 2004, is expected to be completed by the end of this year.
In relation to the decommissioning exercise, the company expects to recognise an impairment loss of RM347 million for financial year 2023, and further provision for retrenchment costs and contract obligation expenses amounting to about RM70 million for financial year 2024.
Hartalega CEO Kuan Mun Leong said in a statement today, “This is a difficult yet necessary decision to ensure that Hartalega will be able to weather the tough market landscape.
“As we undertake this exercise, we are committed to treating all Hartanians fairly and with respect. With a period of approximately six months for the decommissioning to be completed, we have put in place measures to support affected employees, which include but are not limited to the opportunity for redeployment to our NGC facility for relevant roles, competitive severance packages, engaging with affected employees to provide outplacement support during the six-month period, helpdesk to address any employee concerns and queries and human resource assistance and counselling for affected employees.”
Given the challenging market conditions, he said, Hartalega has put in place a five-year strategic plan to reinforce business resilience and long-term sustainability and the de-commissioning of the facility is part of its operational rationalisation efforts.
“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, as well as generating higher energy and labour costs, in addition to higher maintenance costs due to the age of the facility. Hence, once the decommissioning is completed, we expect to see a reduction in operating cost and depreciation, which will have a direct benefit on our bottom line,” he added.
Ultimately, Kuan said, this will lay the groundwork to enhance cost optimisation and strengthen operational efficiencies, leveraging the higher line speed and technological advancements at the NGC facility.
Taking a longer-term perspective, Hartalega’s NGC facility has the capacity for future expansion, as it continues to progress strategically in line with prevailing market supply and demand dynamics, he added.