KUALA LUMPUR (March 10): Glove giant Hartalega Holdings Bhd will be investing RM7 billion to build 16 new glove factories in Malaysia's northern region over the next 20 years.

As part of the expansion, the rubber glove manufacturer's wholly-owned subsidiary inked a sale and purchase agreement with Northern Gateway Free Zone Sdn Bhd — a subsidiary of Minister of Finance Inc-owned Northern Gateway Sdn Bhd — for 250 acres (101.17ha) of land in the Kota Perdana Special Border Economic Zone (SBEZ) in Bukit Kayu Hitam, Kedah.

The purchase price of the land is RM228.7 million, according to a bourse filing.

Both parties have signed an option agreement for Hartalega to purchase another 130 acres or 52.61ha of land in the same location. Northern Gateway is the master developer of the SBEZ.

The acquisition is expected to be completed by March 2022, and is not expected to yield any impact on its share capital, substantial shareholders' holdings, net assets, earnings per share or gearing for the financial year ending March 31, 2021.

The land is freehold, and the purchase will be funded through Hartalega's internally generated funds and/or existing credit facilities. The first plant is expected to be completed in 2024.

As it currently stands, Hartalega produces 43 billion pieces of gloves per year. Its expansion plans include the NGC 1.5 in Sepang, which will boost its capacity to 63 billion pieces per year once it is completed.

With this longer-term expansion in Kedah, Hartalega will add another 80 billion pieces per year, resulting in its total capacity rising to 143 billion pieces per annum once fully completed.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said Hartalega's choice to invest in the Kota Perdana SBEZ is an endorsement of the zone's rising status as a new and preferred investment destination. 

"The Kota Perdana SBEZ is now poised to further enhance its position and reputation in attracting other high-end and export-oriented industries, leveraging on its competitive advantage such as proximity to the Malaysia-Thailand border as well as the Penang Port. This will also drive economic development in Kedah, with a huge, positive impact on the northern region. Most significantly, the project is expected to generate more than 12,000 jobs and help upskill local talent and vendors, while supporting infrastructure development," said Tengku Zafrul in a statement.

Meanwhile, Hartalega chief executive officer Kuan Mun Leong remarked that in view of the long-term structural step-up in global demand, its production capacity must be accelerated. Kuan noted that its growth strategy remains focused on Malaysia given the existing comprehensive ecosystem and supply chain for the sector, with its expansion plan to solidify the country's status as the largest glove manufacturer globally.

"Our aim is to cultivate a robust supply chain, as well as upskilling local talent and vendors, to transform the region into an integrated industrial park for medical devices in the future, establishing the region as an attractive destination for both foreign and domestic direct investment. Upon completion, Hartalega estimates to contribute to more than 5% of Kedah's total GDP (gross domestic product)," Kuan said.

As of 3.25pm, Hartalega shares were 0.93% or nine sen higher at RM9.81, valuing it at RM33.63 billion. It saw 2.4 million shares done.

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